Goldman, ICBC trim targets for Alibaba, JD.com in red flags for China’s corporate earnings season
- At least eight brokers have lowered their price targets for Alibaba, while the biggest cuts have affected JD.com even after the stock hit rock bottom
- China’s corporate profits are in structural decline, heralding lower returns on equity and price-earnings multiples, according to BCA Research
At least eight brokers lowered their expectations for Alibaba this month by 2.2 per cent to 9.8 per cent, bringing the consensus 12-month target to HK$136.40 from HK$137.99 a month ago. Among 40 analysts tracked by Bloomberg, 39 recommended a buy, while Bernstein stayed neutral with the least-bullish target of HK$98. Alibaba owns this newspaper.
The biggest cuts were seen in JD.com, even after the stock crashed this year to an all-time low in Hong Kong. Twelve brokers including Macquarie and JPMorgan slashed their targets by 7 to 39 per cent, knocking the consensus down to HK$201.95 from HK$220.51 a month ago.
HSBC and Goldman Sachs cut their price targets for Tencent by 3.4 per cent and 1.9 per cent, respectively, leaving the WeChat operator relatively unscathed this round.
Alibaba fell 1.6 per cent to HK$81.30 on Monday, while JD.com lost 0.5 per cent to HK$103.70. Tencent weakened 1.8 per cent to HK$301.20. The trio lost a combined HK$300 billion (US$38.4 billion) in market value last quarter, or almost a fifth of the rout on the stock market, according to Bloomberg data.
“Most of the tech companies may, overall, just have tepid revenue growth in the third quarter,” said Willer Chen, research analyst at Forsyth Barr Asia. The guidance provided by the companies is “very underwhelming” for the rest of the year and there is little visibility on the outlook next year, he added.