Alibaba bear: most accurate analyst maintains sell rating, says earnings outlook dire for internet giant and peers like Tencent

Name: Downtown Shanghai remains deserted despite ‘reopening’
Uploaded: 2022-06-01T03:03:43.000Z
Duration: 3 min 36 s
Description: Downtown Shanghai remains deserted despite ‘reopening’

An analyst whose calls on Alibaba beat 67 peers over the last year cut his price target for the tech giant’s stock by 15 per cent despite its recent positive results

The next quarter will be very challenging as the impact of Covid-19 lockdowns on consumer spending and advertising budgets becomes clear, he says

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The mascot for Alibaba Group Holding’s Taobao e-commerce platform near the company’s headquarters in Hangzhou on February 21, 2022. Photo: Bloomberg

Zhang Shidong

Published: 11:03am, 1 Jun 2022Updated: 4:56pm, 1 Jun 2022

The most accurate analyst tracking Alibaba Group Holding over the past year has maintained his bearish call on the e-commerce juggernaut and other Chinese tech stocks, arguing that their better-than-estimated recent results were simply due to base effect and cost savings.

Manuel Muehl, a Frankfurt-based analyst at DZ Bank, cut the price target of Alibaba’s American depositary shares by 15 per cent to US$85 even after the Chinese company last week posted revenue growth for the March quarter that exceeded analysts’ projections. While those results fuelled a rally in the company’s stock, Muehl has maintained a sell rating on the stock, which he downgraded from a buy in July.

Muehl’s calls beat 67 peer analysts tracked by Bloomberg, according to the US financial-data provider. Investors who followed his sell rating, or shorted the stock, would have avoided steep losses as Alibaba tumbled 56 per cent over the past year, before accounting for transaction costs. He is the only analyst that currently has a sell rating on Alibaba.

“We found the earnings season for the entire sector to be pretty lacklustre,” he said in an interview with the Post. “Margins have come down across the board, and revenue growth has been slowing substantially.”

03:36

Downtown Shanghai remains deserted despite ‘reopening’

Muehl’s bearish call may dampen optimism among some investors who believe the worst days for Chinese tech stocks have passed and that stock prices have already priced in industry headwinds. Alibaba’s Hong Kong and US-traded shares have rallied 17 per cent since the quarterly earnings release.

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