Alibaba Upgraded by Bernstein on Attractive Risk-Reward
2022.07.20 21:26
Alibaba (BABA) Upgraded By Bernstein on Attractive Risk-Reward
By Sam Boughedda
Shares of Chinese e-commerce giant Alibaba (NYSE:BABA) were upgraded from Market Perform to Outperform by a Bernstein analyst.
The analyst also raised Bernstein’s price target on the stock to $130 from $115, saying they expect Alibaba’s incremental GMV share to improve in the coming quarters as they lap the merchant exodus last year and softer macro comps, and expect lower strategic initiatives spend to drive acceleration in China Commerce EBITA growth.
“We think US$85-90 will stick as a floor for valuation, and see attractive risk-reward after the pull back in the past week,” said the analyst. “The wheels of regulatory movement appear to be turning again at Ant, and progress towards an eventual IPO should help Alibaba’s valuation.”
The analyst added that they believe it’s “a matter of time” before Alibaba’s Hong Kong listing is converted to primary, while stating “we’re probably still 12 to 18 months away from livestreaming e-commerce share gains slowing in earnest.”
“As this happens we think Alibaba’s incremental GMV share can rebound — say back to the 20% range. Alibaba management have sounded more confident lately, and argue core margins will stabilise in the coming quarters,” wrote the analyst. “Recent overhangs less of a concern. News of Alibaba execs being summoned over the Shanghai data leak was negative for sentiment, but should have a limited impact on earnings.”
Writing about Covid cases in China and related lockdowns, the analyst stated case numbers would need to be watched, but the top cities have mostly avoided major lockdowns. However, the “mortgage boycott news has potentially serious implications for social stability, but this should also mean that government action will be swift.”
Alibaba shares are down 1.6% Wednesday.
