This Analyst Believes Amazon (AMZN) Stock May Be a Better Bet Than Alibaba (BABA)
Over the past several months, Chinese e-commerce giant Alibaba (BABA) has been left for dead. The consensus belief among market participants is that China’s economy is slowing down while the risks of its trade conflict with the U.S. are rising. That combination has many economists, investors, and analysts worried about economic growth in China hitting a major speed bump in the near-term or the medium term.
As such, Stifel’s top analyst Scott Devitt is removing Alibaba stock from the Stifel Select List and replacing it with Amazon (AMZN). Subsequently, the analyst lowers his price target to $200 (from $220), while keeping his rating at Buy.
Devitt opined, “We are making this change given an increasingly uncertain China macro environment and near-term optimism for Amazon. We are also updating our Alibaba model resulting in near-term revenue growth assumptions that are ~300bps lower versus our prior forecast. Our PT falls to $200 as a result. Despite the difficult China market backdrop, we continue to view BABA as a core long-term holding but recognize near-term performance is likely reliant on the overall macro picture.”
“We are adjusting our F2Q / F2019 revenue growth assumptions lower after review […] We now forecast total revenue growth of 54.9% / 55.0% y/y in F2Q / F2019 versus 58.4% / 58.0% previously. The change is primarily to reflect lower commission revenue growth and greater seasonality in Cainiao revenue growth. Our core commerce (customer management + commission revenue) growth estimate for F2Q is now 29.2% y/y from 30.5% previously,” the analyst added.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Scott Devitt has a yearly average return of 21.0% and a 66.9% success rate. Devitt has a 25.0% average return when recommending BABA, and is ranked #65 out of 4887 analysts.
Net net, while the Chinese e-commerce titan is no longer on the Stifel Select List, most analysts on Wall Streets are out rooting for BABA to be a winning stock pick, as TipRanks analytics showcase stock as a Strong Buy. Based on 19 analysts polled in the last 3 months, all 19 rate Alibaba stock a Buy. The 12-month average price target stands at $222.84, marking a nearly 56% upside from where the stock is currently trading. (See BABA’s price targets and analyst ratings on TipRanks)