Alibaba keeps climbing ahead of Q3 results as Baird suggests rally could have 'legs'
Jan. 20, 2023 1:28 PM ET Alibaba Group Holding Limited (BABA)By: Chris Ciaccia, SA News Editor 26 Comments
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Alibaba (NYSE: BABA) shares rose another 2.5% on Friday and with shares up almost 100% since the October low, investment firm Baird suggested the rally can keep going into the Chinese tech giant's quarterly results next month.
Analyst Colin Sebastian, who has an outperform rating on Alibaba ( BABA), noted that online retail sales data in China for December looks to have improved, while the broader economic conditions and relaxation in government policy looks to be working in its favor.
"According to data from the National Bureau of Statistics, online sales of physical goods in China grew 6% year-over-year in 2022, and we estimate that December volumes grew ~15% [year-over-year], accelerating from~13% and ~4% in October and November, respectively," Sebastian wrote in a note to clients.
"We estimate that online sales likely declined 15% month-over-month in December, which would be consistent with pre-covid trends from 2018 and 2019 (-13% and -15%, respectively), and an improvement from 2020 and 2021 sequential trends (-20% and -24%) with 'double 11' shopping concentrating sales volume into November."
Concerning the sharp run up in the stock, Sebastian noted that despite the sharp gain since October and 40% rise over the past month, there may be more room to run.
"Unlike what happened in the west, we are not expecting a rotation out of e-commerce stocks in China post-pandemic, since the 'work from home' trade never caught on," Sebastian explained, adding that the stock's valuation is still "well below historical average earnings multiples."
Lastly, with activist investor Ryan Cohen reportedly asking Alibaba ( BABA) to boost its share buyback program, Sebastian noted that the company spent $9.6B on share buybacks in fiscal 2022 and it has another $22B still outstanding as of mid-November. |
