Alibaba's Price Target Lowered by Mizuho Analyst Amid Diverging Consumer Confidence Levels

By Don Francis, Editor
February 9, 2024 7:48 AM UTC
Alibaba's Price Target Lowered by Mizuho Analyst Amid Diverging Consumer Confidence Levels

Mizuho's James Lee lowered their price target on Alibaba (NYSE: BABA) by 5% from $100 to $95 on 2024/02/08. The analyst maintained their Strong Buy rating on the stock.

Lee's price target cut was in response to Alibaba's Q3 2024 earnings report released on 2024/02/07. The report showed that Alibaba missed earnings per share (EPS) estimates but managed to achieve revenue growth. The company reported EPS of $2.67, which missed the Zacks Consensus Estimate of $2.73 by 2% year-over-year (Y/Y). However, their revenue of $36.67 billion was up 5% Y/Y, even though it fell short of the Zacks Consensus Estimate of $37.21 billion.

Lee believes that there will be a "meaningful divergence of consumer confidence levels" between the Chinese and American Internet sectors in 2024. The analyst predicts that U.S. sector leaders in advertising, e-commerce, and gig economy services will gain market share and experience margin expansion due to reduced inflation and a tight labor market.

To capitalize on this trend, Lee suggests that investors should "play offense" in the U.S. Internet market by selecting companies with the potential to outperform expectations and possess long-term flexibility. Amazon.com and Doordash are highlighted as Lee's top U.S. options.

Conversely, Lee expects China's consumer spending to be muted due to persistent real estate problems and increasing unemployment, despite the country's record-high savings rate. As a result, the analyst recommends that Internet retail companies in China should "play defense." Investors should seek out names with fundamentals that have not yet fully recovered from post-COVID lockdowns. Lee identifies Tripcom Group as their firm's preferred name in the sector.

Other analysts also updated their ratings on Alibaba on 2024/02/08. JP Morgan's Alex Yao lowered their price target by 4.5% from $110 to $105 but maintained their Strong Buy rating on the stock. Goldman Sachs's Ronald Keung lowered their price target by 13.2% from $121 to $105, also maintaining their Strong Buy rating. Susquehanna's Shyam Patil lowered their price target by 10% from $150 to $135, while still maintaining their Strong Buy rating.

Despite these adjustments, 100% of top-rated analysts currently rate Alibaba as a Strong Buy or Buy. No analysts see it as a Hold, and no analysts either recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that Alibaba's upcoming year will deliver EPS of $6.75. If the analysts are correct, BABA's next yearly EPS will be up by 23.6% on a year-over-year basis.

Since Alibaba's latest quarterly report on 2024/02/07, the stock price has declined by 3.9%. Year-over-year, the stock is down 32.7%. During that period, Alibaba is trailing the S&P 500, which is down 21.4%.

Mizuho analyst James Lee is ranked in the top 2% out of 4,469 Wall Street analysts by WallStreetZen. They specialize in the Communication Services and Industrials sectors, among others.

Alibaba Group Holding Limited specializes in e-commerce, retail, internet, and technology. The company provides consumer-to-consumer (C2C), business-to-consumer (B2C), and business-to-business (B2B) sales services via web portals, as well as electronic payment services, shopping search engines, and cloud computing services. The company hosts the largest B2B (Alibaba.com), C2C (Taobao), and B2C (Tmall) marketplaces in the world. Alibaba was founded in 1999 and is headquartered in Hangzhou, China.

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