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ALIBABA GROUP
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The Chinese has gone through many upheavals since the corona virus came to the world – the stock reached an all-time high near the end of 2020, when it reached a price of about $318, but since then the stock has been on a downward trend. The trough came last October, when the stock reached a price of $57, a distance of more than 80% from the peak. The main reason for the decline in the share price throughout the period was the zero corona policy of the Chinese government, which the government began to get rid of towards the end of 2022, which sent the share up 115% by the end of last month.
The opening of China, together with the increase in the stock and the rest of the Chinese stocks gave a certain confidence that the declines in terms of Alibaba’s stock are already behind us, but since the end of January the markets in the USA began to fall and swept away the Chinese stocks, including Alibaba. The declines occurred regardless of the situation in China, Asher seemed to be the one that pushed for the increases during the end of 2022 and the beginning of 2023, but it seems that what actually led those increases was the timing of the indices on Wall Street, which also increased during that period.
In the last month the indices fell between 4.5% and 6.5% while at the same time Alibaba lost more than 25% of its value, despite the positive reports it published last week. The company beat analysts’ expectations with revenues of $35.9 billion and adjusted earnings of $2.6 per share, the expectation was for revenues of $35.76 billion and adjusted earnings of $2.37 per share. “We delivered a solid quarter despite the drop in demand, the disruptions in the supply chain and logistics due to the impact of the Corona changes,” said Daniel Zhang, chairman and CEO of the group after the reports were published.
Despite the recent declines, analysts believe that the situation is expected to change. The analyst consensus according to FactSet gives Alibaba a target price of $143, about 62% above the current price. In addition, after last week’s reports, 14 analysts raised their target price for the company: “We still believe in Alibaba, whose recent reports showed an improvement in profit margins, despite a difficult demand environment,” said analyst Yosef Squali from Truist Securities. Squally rates the company a “buy” and he raised the target price from $120 to $130.
Analyst Pawan Jiang from Benchmark struck also believes in the company and says that “the company has a positive risk/opportunity ratio in this case when the opening of China is taken into consideration.” Benchmark also rated Alibaba a “buy” with a higher target price of $180 per share. The company also warns against “downside risk from macroeconomic matters, increasing regulation and the ability to implement initiatives against the competition”.
Not only the analysts are positive – about two weeks ago it was reported that the investment company of the well-known investor Michael Berry purchased 50,000 of Alibaba shares in the last three months of last year, in addition to the purchase of 75,000 of the Chinese JD shares. The company’s future earnings multiple now stands at 10.5 and the company’s value stands at $256 billion.
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