Analysts Reassure Alibaba Investors

Loop Capital analysts reassured Alibaba (NYSE: BABA) investors, suggesting they need not worry about the recent downturn in PDD stock.

In a note to clients, Loop Capital stated: “We are not overly concerned about a disappointing outlook from competitor PDD and the meaningful devaluation in the company’s stock this week.”

The firm emphasized that despite PDD’s disappointing outlook and significant devaluation, Alibaba remains on a positive trajectory. They reiterated their Buy rating on Alibaba with a maintained price target of $115.

Loop’s analysts added that Alibaba’s prospects are strengthened by ongoing share stabilization, monetization efforts, stock repurchase leverage, and likely inclusion in the Hong Kong Stock Connect.

They believe PDD’s recent challenges are due to overly aggressive monetization strategies and issues within its seller community, which may attract regulatory scrutiny. Over the past two years, PDD’s monetization rate has nearly doubled, while Alibaba’s Taobao Tmall has seen a decline in its take rate.

Despite PDD’s plans to reduce transaction fees by ¥10 billion, Loop Capital analysts do not expect this to significantly resolve PDD’s challenges or enhance price competition.

They reiterated that Alibaba’s strategic position remains strong, especially in light of PDD’s struggles. Loop Capital’s confidence in Alibaba’s future is supported by expectations that the company’s various efforts in monetization and stock repurchase will continue to drive shareholder value.

The analysts maintain a positive outlook for Alibaba, urging investors to focus on the company’s promising future rather than the turbulence faced by Pinduoduo (NASDAQ: PDD). “We continue to see a positive event path ahead for Alibaba,” the firm noted.