What’s the forecast for Alibaba shares after sales miss?

Despite lower price targets, analysts remain largely optimistic about the e-commerce stock.

  • Alibaba Group Holding (NYSE: BABA) shares closed just under US$200 on Thursday (06 August 2021)
  • The stock fell 4% in early trading on Tuesday to under US$195 post-earnings,but quickly recovered
  • The e-commerce giant posted a revenue of US$31.9 billion for its June-ending quarter, missing analysts’ estimates of US$32.4 billion
  • Analysts have since lowered their BABA price targets to a consensus of US$306, down from US$319 a month ago
  • Interested in trading Alibaba shares? Open an account with us to get started.

BABA stock price: what are analysts’ latest targets?

Alibaba US shares have managed to stay afloat, despite the stock’s price target being slashed by analysts across the board, after it turned in a weaker-than-expected June-ending quarter this week.

The e-commerce giant’s US listing now has a consensus price target of US$306.03, down from US$318.54 a month ago, based on the latest data published on MarketBeat. The price target equates to a potential 53.6% upside from BABA’s latest closing price of US$199.30.

Although it retains a majority rating of ‘buy’ from 27 out of 29 analysts polled, BABA’s consensus rating score has also fallen to 2.93 from 3.00 a month ago.

The largest price target cut came from Susquehanna analyst Shyam Patil, who lowered it to US $310 from US$350.

However, he retained a ‘positive’ call on the stock, as he viewed Alibaba’s non-commission advertising revenue’s year-on-year growth of 57% as very ‘healthy’, in spite of the ‘slight miss’ in consolidated revenue.

Patil also believes that the company remains on track for its revenue guidance of 30% year-on-year growth in FY2022.

Elsewhere, HSBC’s Carson Lo reduced his firm’s fair value estimate on Alibaba to US$250 from US$270, but still kept a ‘buy’ recommendation.

The analyst noted that the company's multi-app strategy has driven more investment into strategic areas, which present opportunities for Alibaba to expand its market share.

On the other hand, Bloomberg Intelligence analyst predicted that the group’s fiscal 2022 profit ‘may be saddled’ as it ramps up spending to ‘make its order-fulfillment services and marketing campaigns more efficient’ across its businesses.

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What are the key takeaways from Alibaba’s latest earnings?

An anti-monopoly fine, partial settlement and strategic investments amounting to 27.4 billion yuan (US$4.2 billion) during the quarter hit the group’s cash flow particularly hard.

Net cash provided by operating activities fell 33% year-on-year to 33.6 billion yuan (US$5.2 billion), while free cash flow also decreased 43% to 20.7 billion yuan (US$3.2 billion) from the same period a year ago.

Group revenue came in at 205.74 billion yuan (US$31.87 billion) for the quarter ending 30 June 2021, which was an increase of 34% year-over-year.

This was below analysts’ estimates of 209.39 billion yuan (US$32.4 billion), according to IBES data from Refinitiv.

Meanwhile, adjusted earnings per US share was 16.60 yuan (US$2.57), an increase of 12% year-over-year, while adjusted earnings per share was 2.08 yuan (US$0.32 or HK$2.50), an increase of 12% year-over-year.

Perhaps most relevant to investors is the fact that Alibaba will be increasing its share repurchase programme from US$10 billion to US$15 billion. This will be the largest share buyback programme in the company’s history.

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