3 Alibaba Analysts Say Valuation Is Attractive Despite Q1 Disappointment

3 Alibaba Analysts Say Valuation Is Attractive Despite Q1 Disappointment

Photo: the Tmall app. Courtesy Alibaba. 

Alibaba Group Holding Limited (Nasdaq: BABA) reported June quarter results Tuesday, sending the Chinese e-commerce company's stock lower. 

The Alibaba Analysts: Needham analyst Vincent Yu maintained a Buy rating and a $330 price target for Alibaba shares.

Raymond James analyst Aaron Kessler reiterated a Strong Buy rating and $300 price target.

KeyBanc Capital Markets analyst Hans Chung maintained an Overweight rating and lowered the price target from $270 to $250.

Needham Sees Alibaba's Valuation As Attractive: Alibaba revenues were slightly below expectations, but the margin came in better than expected despite investments, Needham analyst Yu said in a note.

Tougher comps caused by COVID-19 led to a 5% drop in China e-commerce revenues, the analyst said. Cloud revenues continued to be hit by the loss of one top international customer due to local regulation, he said. 

The margin outperformance was due to the Street overestimating the cadence at which Alibaba is allocating its planned investments, Yu said.

Key investments focused on the Community Marketplace business and Taobao deal showed good initial results, the analyst said. Investments in these two core areas will likely ramp up in the second half, he added.

The losses incurred by these investments will likely widen in the second half, Yu said.

"We believe Alibaba is navigating the current regulatory environment well and is poised to grow in several business areas such as ride-hailing and food delivery, in which increased regulations can benefit the overall industry as some competition will be eliminated."

Needham sees the valuation of the stock as attractive.

RayJay Sees No Material Risk From Regulators: While Alibaba's core Marketplace was slower than expected, comps are expected to ease in the December and March quarters, Raymond James analyst Kessler said.

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