Shares of Alibaba (NYSE:BABA) are trading higher despite an analyst downgrade. Indeed, analysts at Bernstein, led by Robin Zhu, have lowered their rating for Alibaba from Outperform to Market Perform, dropping the price target from $130 to $98. A year ago, analysts were optimistic about Alibaba’s prospects, expecting economic reopening to bolster growth. However, Alibaba’s shares have stagnated since, and despite its low valuation, the concerns of perennially sluggish growth are now more pronounced. Feedback from merchants indicates a downward trend in marketing expenditures, leading to worries about the risk of a value trap, particularly as quarterly comparisons become more challenging.
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Alibaba’s difficulties, according to the Bernstein team, extend beyond merely a lack of user traffic. Merchant congestion has led to increased search costs and diminished returns, exacerbated by the fact that Alibaba’s marketplaces host approximately six million active merchants, almost twice as many as Pinduoduo (NASDAQ:PDD).
Overall, analysts have a Strong Buy consensus rating on BABA Stock based on 15 Buys assigned in the past three months, as indicated by the graphic above. Furthermore, the average price target of $141.73 per share implies 62.61% upside potential.
