Alibaba’s (NYSE:BABA) Q3 financials failed to give a significant boost to its stock price. However, this shouldn’t surprise much, as the company warned earlier that macro headwinds and increased competitive activity could continue to take a toll on its performance.
Notably, Alibaba’s Q3 earnings came in ahead of the Street’s estimates. However, its top-line fell short of the consensus estimate due to the macro situation and increased competition in China. Moreover, the slowdown in its cloud and international commerce revenues further remained a drag.
In response to Alibaba’s Q3 performance, Stifel Nicolaus analyst Scott Devitt lowered his Q4 and FY22 estimates. The analyst cited a “weaker than expected macro backdrop” for the cut. However, Devitt highlighted Alibaba’s active customer growth rate as “healthy.”
Alibaba’s active consumer base continued to grow rapidly. In Q3, Alibaba added 43 million active consumers, which is encouraging.
Now What?
While near-term challenges led Devitt to lower his price target on BABA stock to $135 (down from $150), he reiterated his Buy rating.
Devitt’s bullish view is centered around Alibaba’s large market share in China and investments in growth initiatives (including cloud services, content, and multi-channel retail). Further, the analyst pointed out that Alibaba’s “international expansion is still in the early stages,” representing an “attractive long-term opportunity.”
Along with Devitt, Alex Yao of J.P. Morgan also maintains a positive outlook on Alibaba stock. Yao expects management’s commentary around tapering losses to lift BABA stock in the near term.
It’s worth noting that Alibaba expects operating losses for Taobao Deals and Taocaicai to narrow in the coming quarters.
BABA Price Forecast
Alibaba stock has lost about 57% of its value over the past year, which is why BABA’s stock price forecast on TipRanks shows significant upside potential. The average Alibaba price target of $188.56 implies 73.1% upside potential to current levels.
Further, most Wall Street analysts are bullish on BABA stock. Its Strong Buy consensus rating is based on 18 Buy and 2 Hold recommendations.
Also, TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds have accumulated Alibaba stock on the weakness. Per the tool, hedge funds have added 167.1K Alibaba shares in the last quarter.
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