Alibaba Group Holding Ltd.’s October rally has given way to a renewed slump that has the stock heading for a record low while technology rival JD.com Inc. is extending its recovery and winning favor with analysts.
After a year of regulatory pressure and, more recently, disappointing quarterly earnings, Alibaba stock has been undergoing a reevaluation by Wall Street.
Some financial analysts have even been making the case that the Chinese e-commerce giant’s competitor, JD.com, maybe a better bet.
New research from investment group Susquehanna marks the latest installment in this trend, with a team of analysts slashing their outlook for Alibaba stock as they raised their target for shares of JD.com (JD).
Analysts led by Shyam Patil at the investment group cut their price target on Alibaba stock by 35% Wednesday—from $310 to $200—but maintained their Positive rating. The shares closed at $136.52 Wednesday, so the Susquehanna price target still implies some 46% upside.
As Patil’s team took the axe to Alibaba’s price target, they elevated estimates for competitor JD.com—raising their price target on the stock by 19% from $80 to $95 Wednesday and maintaining a Neutral rating on the shares.
JD.com ‘s U.S.-listed shares (JD) slipped 0.1% Wednesday with the company’s Hong Kong shares (9618. H.K.) climbing 0.6% Thursday.
Deutsche Bank AG’s Leo Chiang cut his target price for Alibaba’s Hong Kong stock by almost 4% on Monday, saying “near-term challenges”. While raising his target for JD.com by 16%, noting “resilient growth amid macro uncertainties.
Morningstar Inc.’s Chelsey Tam stated similar views in a Nov. 19 note, arguing that “Alibaba’s challenges go beyond the economic cycle”. JD.com offers “more clarity on the long-term margin improvement.”
“Consumers and business partners increasingly trust and rely on JD, and we were able to outpace the industry growth in China in the third quarter,” JD.com president Lei Xu said in the earnings release.
Alibaba’s shares are sharply lower from their all-time high of $319.32 reached on Oct. 27, 2020. The September quarter earnings report triggered a further slide in the stock, dragging it deeper into the red for the year-to-date period. The year-to-date loss now stands at about 38.3%.
In comparison, JD.com shares are up about 0.2% year-to-date. The relative outperformance of the stock has come despite the company operating with the same shortcomings. Alibaba includes weak retail spending and regulatory hiccups.