Here's Why Alibaba's Most Accurate Analyst Goes Bearish Despite Its Earnings Beat

The most accurate analyst tracking Alibaba Group Holding Limited BABA over the past year has maintained his bearish call on the e-commerce juggernaut and other Chinese tech stocks, the SCMP reports.

DZ Bank analyst Manuel Muehl argued that their better-than-estimated recent results were simply due to base effect and cost savings.

Muehl cut the price target of Alibaba by 15% to $85 and maintained a Sell rating despite its Q4 beat. He is the sole analyst with a Sell rating on the stock that tumbled 56% over the past year.

Also Read: Here's Why JPMorgan Upgraded Alibaba, Other Chinese Stocks Months After Calling Them 'Uninvestable'

China's regulatory crackdowns followed a capital expenditure ramp on by Chinese tech companies affecting their free cash flows, which analysts use to gauge corporate financial health, as per Muehl. All of which discouraged Muehl from being bullish.

Muehl also sees a challenging upcoming quarter that will reflect the impact of the lockdowns on consumer spending and advertising budgets.

Brokerages like China International Capital Corp and Citic Securities also slashed their estimates on Alibaba, citing similar reasons.

Muehl's calls beat 67 peer analysts tracked by Bloomberg.

"We found the earnings season for the entire sector to be pretty lackluster," Muehl said. "Margins have come down across the board, and revenue growth has been slowing substantially."

Price Action: BABA shares closed higher by 2.8% at $96.03 on Tuesday.

Photo by Rico Shen via Wikimedia Commons