The last few months have not been good for Chinese stocks. After sudden anti-monopolistic announcements were made by regulators, an implosion at the second largest real estate developer, and tensions flared between CEOs and Beijing, shareholders have found it hard to hang on. All of these fears coupled with an anticipated deceleration in e-commerce trends have led Chinese-based retailers to underperform the broader market.
Some of the country’s largest companies saw their valuations decline in steady fashion over the last half year, interspersed with several bouts of heavy selling pressure. Many analysts saw some of these instances as overreactions by investors, and did not see the regulatory and business-related risks outweighing the foundational soundness of firms like Alibaba Group (BABA) and Pinduoduo (PDD).
After a broad sell-off last quarter, investors were left wondering when the pain would stop. By early last month, the bottom seemed to have been reached by several firms, at least for now. While analyst ratings can tell one side of the story, TipRanks’ Website Traffic tool can provide further insight.
Alibaba and Pinduoduo both rely on their digital platforms for their businesses to operate, and thus, taking a look at visits to their websites can offer more useful intelligence prior to their expected upcoming earnings reports. Let’s take a look at the current data and compare it to the pros’ analyses.
Alibaba
The technology firm is one of the world’s largest retailers, and by October 2020 had ridden an industry-wide wave up to its all-time highest valuation. Investors were encouraged by the anticipated IPO of Ant Group, another company founded by the same man, Jack Ma. However, soon thereafter, Ant’s IPO was blocked, and antitrust probes were opened against Alibaba for uncompetitive business practices.
BABA shares took several losses and the outspoken Ma even disappeared from public view for months. Since then, Alibaba has yet to bounce back to its all-time high and was sold off throughout 2021.
After looking through the BABA website traffic data, a dissonance in visits and share price can be identified. Over the unreported Q3 period, total device visits to aliexpress.com fell 1.53%, while the stock price declined 34.72%. Meanwhile, when comparing the year-to-date ranges of both 2020 and 2021, the analysis shows a 3.46% increase in total device visits.
The stock was covered by Alex Yao of J.P. Morgan, who wrote that he has turned “more cautious on Alibaba’s domestic ecommerce growth outlook in the coming quarters.” His explained his hypothesis on the company by detailing that regulatory shifts across several industries will catalyze a protracted deceleration in consumption.
Despite these discouraging forecasts, Yao believes the stock is undervalued and could see considerable upside if regulatory concerns stabilize. Yao rated the stock a Buy and assigned a price target of $255.
On TipRanks, BABA has an analyst rating consensus of Strong Buy, based on 19 Buys, 1 Hold, and 1 Sell. The average Alibaba price target is $239.79 per share. This target represents a potential 12-month upside of 43.75%.
Pinduoduo
A lesser known but similarly large-cap stock, Pinduoduo runs an online agricultural marketplace between farmers and distributors, and is the largest of its kind in China. Like BABA, the company has also been plagued by the same macro forces in the market which dragged down its peers.
PDD peaked in February 2021, but has seen a loss of about 51% since then. The innovative game-like social commerce structure of its shopping experience has attracted many consumers, although the firm has yet to turn an actual profit.
The PDD website traffic data shows a considerable divergence. Quarter-over-quarter, total device visits to pinduoduo.com rose 3.62%, while the share price declined 28.62%. When comparing the year-to-date ranges of 2020 and 2021, total estimated visits have fallen 11.12%.
Remarking on the stock in his report, Eddy Wang of Morgan Stanley asserted a bullish opinion. He argued that Pinduoduo is leading China in users to its e-commerce platform and has been actively disrupting the industry. The analyst also commended PDD’s business model, which engages its user base for extended periods of time.
Wang rated the stock a Buy, and provided a $130 price target.
On TipRanks, PDD has an analyst rating consensus of Moderate Buy, based on 6 Buy and 3 Hold ratings. The average Pinduoduo price target is $128.56 per share. This target suggests a possible 12-month upside of 35.33%.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
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