Alibaba Faces Bigger Macros Challenges Ahead, BofA Says

Alibaba Group Holding Ltd – ADR (NYSE: BABA) indicated its gross merchandise value in the domestic marketplace had begun to decline on a year-over-year in March and had contracted by “teen %” in April.

May continues to be challenging, although there are signs of fulfillment bottlenecks beginning to ease, according to BofA Securities.

The Alibaba Analyst: Eddie Leung maintained a Buy rating for Alibaba while reducing the price target from $175 to $162.

The Alibaba Thesis: The company is witnessing an increase in interest from merchants in its June promotion, but there are “uncertainties in consumer demand in discretionary products,” Leung said in the note.

“Cloud, local services and EU eCommerce also face macro headwinds,” the analyst mentioned. He added that the company had “rolled out efficiency measures, reducing subsidies in new initiatives and controlling headcount.”

Leung reduced the earnings estimates for 2022 and 2023 from $23.31 to $20.24 and from $9.04 to $8.51, respectively, “to factor in a more gradual demand recovery and new RMB exchange rates.”

BABA Price Action: Shares of Alibaba had declined by 0.6% to $93.93 at the time of publication Friday.