Stock Analysis & Ideas

Alibaba Stock: Favorable Risk-Reward at Current Valuation

2023 so far is all about the turnaround. Previously well-beaten stocks are on the up again after getting hammered by 2022’s bear. One such name on the comeback trail is Alibaba (NYSE:BABA). However, it should be noted the Chinese e-commerce giant’s recovery already began toward the end of last year and the stock has managed to carry the momentum into 2023 (up by 52% over the past three months).

Can it continue pushing ahead from here? Benchmark’s Fawne Jiang certainly thinks so. Calling BABA stock a “top pick for a big cap China value play in 2023,” the 5-star analyst lays out the bull-case.

“We anticipate a fundamental turnaround taking shape in 2023/FY2024, benefiting from relaxation of COVID restrictions, accommodating policies to revive consumption and easing regulatory environment,” Jiang said.

That said, before all the good stuff happens, over the near term, Jiang notes that the infection surge in the wake of China’s relaxation of its zero-Covid policy could “continue to take a toll on consumption.”

With Alibaba set to report third quarter fiscal 2023 results (December quarter) later this month, Jiang anticipates “muted growth” in F3Q23 and probably F4Q23, although that is somewhat dependent on the Covid situation.

However, from F1Q24 (June quarter) onwards, Jiang expects a “fundamental inflection point to kick in reaccelerated growth through FY2024.”

This is mainly down to a recovery in consumer spending which will result in the return of core CRM growth and particularly relevant for core discretionary categories, like apparel, beauty and cosmetics – facilitated by the improving macro backdrop and “logistics reboot.” The company’s increased focus on efficiency and “investment optimization” should also lead to “improving earnings visibility.”

Signing off by highlighting Alibaba’s “favorable risk/reward profile,” Jiang rates BABA shares a Buy along with a $180 price target. At current valuation, she sees a 70% one-year upside for the shares. (To watch Jiang’s track record, click here)

Jiang is only one of many analysts anticipating a good year for the stock. All 16 analyst reviews posted over the past 3 months are positive, naturally culminating in a Strong Buy consensus rating. According to the $138.53 average target, investors will be sitting on returns of 31% a year from now. (See Alibaba stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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