Top Analyst Pulls Back Price Target on Alibaba (BABA) Stock Ahead of Earnings


Alibaba (BABA) is due to release its quarterly results on Friday, November 2. This is an event that is sure to be closely watched by traders around the world as they try to decipher whether or not Chinese stocks will continue to decline as trade tension between Washington and Beijing persists.

Amid ongoing and growing worries, Oppenheimer analyst Jason Helfstein lowers his price target on BABA stock to $210 (from $230), while keeping his rating at Outperform.

The analyst noted, “We now expect softer core commerce revenue, mainly due to modestly slower eCommerce industry trends and mix to non-paid product recommendations (vs. paid search). In addition, we also expect investments at New Retail, Ele.me and DME to have a greater impact on near-term margins. We believe management’s commentary around 2H:19 will become the main investor focus during the earnings call, as nearterm headwinds weigh on the company’s FY19 target of 60%+ y/y overall revenue growth and 50%+ (excluding Ele.me and Cainiao). Lowering target to $210 (from $230), but maintaining Outperform rating as we expect trade war rhetoric to subside after mid-term elections.”

“Our $210 PT is based on a SOTP valuation based on 1) $596B pretax value for BABA, 2) negative $22B for minority Interest, 3) $51B for stake in AFG, 4) $29B for long-term investment and investment securities, 5) $14B for current net cash, and 6) negative $115B for corporate tax. This valuation implies 10x/29x/36x on our F19E sales/non-GAAP EBITDA/EPS,” the analyst added.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jason Helfstein has a yearly average return of 18.4% and a 63.5% success rate. Helfstein has a 27.2% average return when recommending BABA, and is ranked #56 out of 4893 analysts.

Overall, Wall Street’s confidence backing this Chinese tech player remains strong, with TipRanks analytics showcasing BABA as a Strong Buy. Based on 19 analysts polled in the last 3 months, all 19 rate a Buy on Alibaba stock. The 12-month average price target stands at $221.79, marking a nearly 57% upside from where the stock is currently trading. (See BABA’s price targets and analyst ratings on TipRanks)

 

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