U.S. stocks declined Friday morning after government data showed the economy created just 38,000 jobs last month, the weakest level of hiring in six years, making the case for the Federal Reserve to raise rates this month much harder.
Among the equities in focus are Chinese online retail giant Alibaba Group Holding Ltd (NYSE:BABA), sportswear giant Nike Inc (NYSE:NKE), e-commerce leader Amazon.com, Inc. (NASDAQ:AMZN), and online payment giant Paypal Holdings Inc (NASDAQ:PYPL). Let’s take a closer look.
Alibaba Group Holding Ltd
HSBC analyst Chi Tsang came out with some sort of defensive commentary on Alibaba, following the news that Japanese telecoms and internet conglomerate SoftBank is selling $8.9 billion worth of shares in Alibaba, reducing its stake from 32% to 25%.
Tsang wrote, “SoftBank’ decision to reduce its investment in Alibaba represents a de-leveraging exercise, optimizing debt allocation to business units instead of at the group level. Six months ago, SoftBank started discussions with Alibaba to reduce its stake by less than 15%. It made it very clear that this transaction does not indicate any reduced confidence in Alibaba’s management. Indeed, we believe the personal relationship between Jack Ma and Masayoshi Son and the corporate relationships remain “very, very strong”. Alibaba said today on a conference call that its ties with SoftBank are “stronger than ever”.”
“We also note that this transaction was carefully structured to lower the risk of the market absorbing 300m shares, with 38% of the stock purchased by the company, insiders, and sovereign wealth funds. The balance is in a Trust that settles in 3 years. SoftBank said that it has no intention of selling additional Alibaba shares after its lock up having achieved its capital objectives,” the analyst added.
Tsang maintained a Buy rating on shares of Alibaba, with a price target of $113, which represents a potential upside of 46% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Chi Tsang has a yearly average return of 8.9% and a 55% success rate. Tsang has an -3.8% average return when recommending BABA, and is ranked #674 out of 3986 analysts.
Out of the 30 analysts polled by TipRanks, 28 rate Alibaba Group stock a Buy, while 2 rate the stock a Hold. With a return potential of 26%, the stock’s consensus target price stands at $97.28.
Morgan Stanley analyst Jay Sole downgraded shares of Nike from Overweight to Equalweight, while reducing the price target from $69 to $60, as the US athletic apparel category is weakening and competition is increasing.
Sole commented: “We believe Nike’s US business (45% of the total) is affected by the headwinds. We lower our US sales growth forecast to 6% from 7% and our margin assumption by 60 bps. This accounts for the EPS change. We continue to believe Nike will deliver strong international results and can quickly cut SG&A, if necessary. These limit downside risk. At the same time, heavy inventory levels and competitive pressures limit upside.”
According to TipRanks.com, analyst Jay Sole has a yearly average return of 11.6% and a 65% success rate. Sole has a 19.8% average return when recommending NKE, and is ranked #534 out of 3986 analysts.
Out of the 19 analysts polled by TipRanks, 14 rate Nike stock a Buy, while 5 rate the stock a Hold. With a return potential of 27%, the stock’s consensus target price stands at $69.91.
MKM analyst Rob Sanderson reiterated a Buy rating on shares of Amazon, while increasing the price target to $850 per share (from $800), following an impressive Q1 results across the board for AMZN and a rather dismal earnings season for U.S. retailers in general.
Sanderson noted, “We are increasing our near-term and long-term growth and margin assumptions across each segment. We consider AMZN the best public market growth story available to investors today as we believe: (1) share of U.S. retail is low and accelerating, (2) the benefits of Prime adoption are just beginning to take hold internationally and the Street is low, and (3) the AWS growth opportunity remains openended with a sustainably high margin profile (where the Street is also low).”
According to TipRanks.com, analyst Rob Sanderson has a yearly average return of -3.8% and a 48% success rate. Sanderson has a 18.8% average return when recommending AMZN, and is ranked #3455 out of 3986 analysts.
Out of 32 analysts polled by TipRanks within the past three months, 29 analysts are bullish on Amazon, while 3 are neutral The average 12-month price target for the company is $807.90, marking a 12.3% potential upside from where the stock is currently trading
Paypal Holdings Inc
Finally, Jefferies analyst Jason Kupferberg reiterated a Buy rating on shares of Paypal, with a price target of $48, which implies an upside of 24.5% from current levels.
Kupferberg wrote, “Our analysis shows that excluding one-time-ish items, underlying non-GAAP operating margins are expanding nicely in 2016. Despite the anticipated continuation of pressure on transaction margins due to mix, we believe PYPL will maintain tight controls on non-transaction expense, driving the type of operating leverage we believe can catalyze multiple expansion for shares.”
According to TipRanks.com, analyst Jason Kupferberg has a yearly average return of 12.2% and a 72% success rate. Kupferberg has a 4.6% average return when recommending PYPL, and is ranked #169 out of 3986 analysts.
Out of the 38 analysts polled by TipRanks, 20 rate Paypal stock a Buy, 15 rate the stock a Hold and 3 recommend a Sell. With a return potential of 10%, the stock’s consensus target price stands at $42.28.