An Analyst Buy Remains a Red Herring in Alibaba

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BABA stock - An Analyst Buy Remains a Red Herring in Alibaba

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Wednesday was an ugly one for Wall Street. A risk-off trade picked up steam for a second straight session led by losses of 2.22% in the large-cap, tech-heavy Nasdaq. And Alibaba (NYSE:BABA) was hardly immune to the sell-off. In fact and despite a mostly comforting analyst call, BABA stock finished down 2.99%.

Raised economic worries tied to yield inversions, follow-through on Tuesday’s Deutsche Bank (NYSE:DB) recession warning, unwanted Covid and Russian escalations overseas, as well as the latest Federal Open Market Committee (FOMC) minutes reaffirming hawkish dialogue by Fed Reserve members were sufficient to put a Citi (NYSE:C) buy reiteration on the diversified Chinese tech giant underwater on the session.

The BABA stock analyst note from Alicia Yap came with a downward price target revision from $200 to $177, but a forecast still commanding a hefty 64% premium to Alibaba’s share price of $107.65 at the close of Wednesday’s session.

Slowing economic activity amid city lockdowns in China tied to the BA.2 covid variant in recent weeks that has “dampened” Alibaba’s profit growth is likely to negatively impact investment subsidies and could delay a second half of 2022 recovery trend, according to Citi.

It sounds bleak, but for patient investors the firm remains positive on BABA stock’s fundamentals and business prospects. Citing strong cash flow and Alibaba recently rebounding from a historical trough price multiple after shedding 74% since October, investors stand to benefit from today’s BABA stock and need to look beyond regulatory and government-related risks, which have likely been priced into shares.

Strikingly, the decline even unwound all of Monday’s BABA stock gains tied to easing delisting fears after Chinese regulators indicated a willingness to open the books of companies listed in U.S. markets to the Securities and Exchange Commission.

The markets took a turn for the worse Wednesday and no doubt Alibaba shares were collateral damage. But a buy recommendation for BABA stock comes with still larger risk at this juncture.

Following the sell-off, the broader market’s confirmed rally has come under pressure, which as a rule makes stock purchases trickier. Lastly and even in the best of times or better days of the past couple weeks, the monthly BABA stock price chart still failed to offer technical-oriented, longer-term investors solid evidence to buy. And that hints that Citi’s buy looks more like a red herring.

On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/04/an-analyst-buy-remains-a-red-herring-in-alibaba/.

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