Alibaba Faces Slow Earnings Growth as New Strategy Takes Shape, Analysts Say

By Don Francis, Editor
February 9, 2024 6:51 AM UTC
Alibaba Faces Slow Earnings Growth as New Strategy Takes Shape, Analysts Say

JP Morgan's Alex Yao lowered their price target on Alibaba (NYSE: BABA) by 4.5% from $110 to $105 on 2024/02/09. The analyst maintained their Strong Buy rating on the stock.

Yao's assessment comes on the heels of Alibaba's lackluster quarterly earnings growth, which they believe is a financial reflection of the company's new sharpened strategy. The Q3 2023 earnings report showed earnings per share (EPS) of $2.67, missing the Zacks Consensus Estimate of $2.73 by 2% year-over-year (Y/Y). However, revenue for the quarter stood at $36.67 billion, up 5% Y/Y, albeit missing the Zacks Consensus Estimate of $37.21 billion.

Alibaba's CEO Eddie Wu emphasized their focus on reigniting the growth of their core businesses, namely e-commerce and cloud computing. The company plans to step up investment to improve users' core experiences, drive growth in the Taobao and Tmall Group, and strengthen market leadership in the coming year. Additionally, Alibaba aims to focus resources on developing public cloud products and sustaining strong growth momentum in their international commerce business.

Despite the lowered price target, Yao pointed out that Alibaba's stock repurchase program provides a hedge against potential price declines. This sentiment is shared by other analysts who updated their ratings on Alibaba on February 8, 2024. Ronald Keung of Goldman Sachs lowered the price target by 13.2% from $121 to $105 but maintained a Strong Buy rating on the stock. Similarly, Shyam Patil of Susquehanna lowered the price target by 10% from $150 to $135 while also maintaining a Strong Buy rating. James Lee of Mizuho lowered the price target by 5% from $100 to $95 but held onto the Strong Buy rating.

It is worth noting that 100% of top-rated analysts currently rate Alibaba as a Strong Buy or Buy, with no analysts recommending a Hold or selling the stock. The consensus forecast among analysts is that Alibaba's upcoming year will deliver an EPS of $6.75, representing a 23.6% increase on a year-over-year basis.

Since the release of Alibaba's latest quarterly report on February 7, 2024, the stock price has declined by 3.9%. Year-over-year, the stock is down 32.7%, trailing behind the S&P 500, which is down 21.4%.

JP Morgan analyst Alex Yao, who lowered the price target on Alibaba, is ranked in the bottom 10% out of 4,469 Wall Street analysts according to WallStreetZen. However, it is important to consider that rankings should not be the sole determinant of an analyst's credibility. Yao specializes in the Industrials and Consumer Cyclical sectors, among others.

Alibaba Group Holding Limited is a leading company in e-commerce, retail, internet, and technology. The company offers a range of services, including consumer-to-consumer (C2C), business-to-consumer (B2C), and business-to-business (B2B) sales services through various web portals. Additionally, Alibaba provides electronic payment services, shopping search engines, and cloud computing services. Notably, the company hosts the largest B2B (Alibaba.com), C2C (Taobao), and B2C (Tmall) marketplaces globally. Founded in 1999 and based in Hangzhou, China, Alibaba continues to be a significant player in the digital commerce landscape.

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