Investment banks lower the target for Alibaba shares by record 18 weeks

Since August, the consensus forecast for the company's shares has decreased from 280 to 200 $. But only one analyst from the 52.

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Regulators first

Analysts began lowering their target for Alibaba shares in the summer. Then the Chinese authorities tightened control over large companies, such as Tencent, DiDi и TAL Education. Earlier, Alibaba also suffered from the actions of regulators.. At the end of last year it became known, that the authorities are conducting an antitrust investigation against the company. As a result of the investigation, the site was accused of abusing its position in the market and issued a fine of $ 3 billion.

Among other things, It revealed, that many Chinese issuers are not Chinese, and offshore companies. The government also tightened control over such.

As a result, in August, HSBC lowered its target for Alibaba shares from 270 to 250 $, UBS - from 280 to 260 $, and Susquehanna from 350 to 310 $.

Then a bad report

After quarterly report, which the company published 18 november, experts continued to revise their forecasts. Retailer's core income, generated by Taobao and Tmall digital marketplaces, compared to 2020, it grew by only 3%. For comparison: a year ago, the growth was 20%.

Analysts and Alibaba itself attributed such results to competition in the online retail market and weak growth in consumer spending.. The company also lowered its forecast for sales growth in the 2022 fiscal year from 30 up to 20-23%.

Within seven days after such a report, Alibaba securities fell by 15%, from 162 to 137 $, and many banks have changed their expectations. Morgan Stanley lowered its share target from 220 to 180 $, Bank of America – from 254 to 209 $. But Susquehanna radically revised its forecast - from 310 to 200 $. All because of the threat of regulators and the slowdown in the Chinese economy, told in Susquehanna.

For the last week 36 from 52 analysts lowered their goals. According to FactSet, the average target for Alibaba shares fell to 200 $.

Late forecasts

Analysts' forecasts can be taken into account, but it is unlikely that decisions should be made on their basis. Often, same as with Alibaba, experts update expectations after the fact, when the main risks are already included in the share price.

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And vice versa, analysts may be overly optimistic, if there are no visible risks. A year ago, when the plans of the leaders of China were not known, and Alibaba's shares were worth 300 $, investment banks only raised their goals.

Despite revisions in forecasts, most investment banks recommend Alibaba shares. So, from 52 analysts advise to buy 47, sell - one.

Already 16 December Alibaba will hold an investor day. Probably, at the event, the company will talk about future growth points, and that, when will her strategic investment in the business pay off?.

In the meantime, the retailer's shares continue to fall in price on news about regulators. According to Bloomberg, China's Cyberspace Authority asks DiDi to withdraw from the New York Stock Exchange, because it is concerned about a possible data breach. In the premarket, DiDi shares fall on 7%, Alibaba shares — on 3%, to 132 $.