U.S.-listed shares of Alibaba Group Holding Ltd. have come under pressure in recent months amid concerns about U.S.-China tensions and a slowdown in the company’s key business, but one analyst says the bigger picture still looks good.
“We think the market is factoring in the impact of macro-headwinds, COVID and soft sentiment in the discretionary category,” Jefferies analyst Thomas Chong wrote Thursday. He argued that the “long-term strategy is intact” for Alibaba 9988, +6.45% BABA, +4.51%.
The company’s U.S.-listed shares are up 5.2% in Thursday’s session on a strong day for Chinese tech stocks. Shares of JD.com Inc. JD, +5.97% are up 7.5%, while shares of Baidu Inc. BIDU, +4.77% are up 5.9%. The KraneShares CSI China Internet ETF KWEB, +4.70% is ahead by 5.2%, while the S&P 500 index SPX, -0.10% is up just 0.1%.
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Chong acknowledges “market uncertainties” within China’s e-commerce landscape, but he thinks that Alibaba is still doing a good job of “capturing opportunities across different segments—young consumers, core consumers (25-44 years old) and older customers (over 45 years old).”
Overall, he sees a “massive ecosystem for high-quality and sustainable growth in [the] China retail market.”
Further, the company has the potential to tap into new growth avenues in areas like groceries and home decor, Chong continued. Alibaba continues to offer various efficiencies that make its platform worthwhile to merchant partners, in his view.
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Chong has a buy rating and $295 price target on Alibaba’s U.S.-listed shares. The shares have lost 44% over the past 12 months as the S&P 500 has advanced 29% and as the KraneShares CSI China Internet ETF has declined 55%.
