Alibaba (BABA) eroded its shareholders’ wealth in 2021 and underperformed the Nasdaq composite index by a considerable margin.
To be precise, shares of this Chinese tech giant have lost nearly 45% in value on a year-to-date basis (compared to 22.4% growth in the Nasdaq composite index) and are trading near the 52-week low.
What’s Hurting Alibaba Stock?
The overall selling in Chinese tech stocks following the government’s increased regulations took a toll on Alibaba. Meanwhile, moderation in growth rate and increased competitive activity further remained a drag.
During the Q3 conference call, Alibaba’s CFO Maggie Wu stated that consumption growth in China has slowed over the past six months. Further, its CEO, Daniel Zhang, added that competition has intensified in the core commerce business.
Given the slowdown and heightened competition, Alibaba expects its top-line to increase by 20-23% in FY22, which is lower than its earlier guidance of 30% growth.
What’s Next for Alibaba?
Economic headwinds and Alibaba’s guidance cut have negatively impacted investor sentiment. TipRanks’ Stock Investors tool shows that investors holding portfolios on TipRanks are cutting their stake in Alibaba stock. It’s worth noting that about 4.9% of these investors have lowered their exposure to Alibaba stock in the past month.
Along with individual investors, hedge fund managers have also been selling Alibaba stock. TipRanks’ Hedge Fund Trading Activity tool indicates that hedge funds have sold 1.1 million Alibaba stock in the last three months.
Meanwhile, Goldman Sachs analyst Piyush Mubayi removed Alibaba stock from the “Conviction Buy List.” Mubayi expects Alibaba’s sales growth rate to decelerate in the coming quarters. However, he maintained a Buy rating on Alibaba stock, given its low valuation.
While Alibaba’s revenue growth rate is expected to moderate, its business investments will likely “improve long-term monetization and the competitive position,” said Scott Devitt of Stifel Nicolaus. Devitt has a Buy rating on Alibaba stock. However, he revised his estimates (revenue and EPS) lower and reduced the price target to $170 from $210 following the guidance cut.
Wall Street’s Take
Alongside Mubayi and Devitt, most of the analysts are upbeat about Alibaba stock. On TipRanks, BABA sports a Strong Buy consensus rating based on 21 Buys and 2 Holds.
However, Alibaba stock scores a 6 out of 10 from TipRanks’ Smart Score rating system, indicating that it could perform in line with market averages.
The average Alibaba price target of $213.50 implies 67.4% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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