After trading in a firm downtrend since July 2023, Alibaba (BABA) a downgrade last week. Morgan Stanley called PDD (PDD) its top pick. It downgraded Alibaba.
The analysts are expecting PDD’s Temu e-commerce app will gain market share. Investors have yet to fully value PDD’s cross-border business through the Temu app. Chinese customers have weak household incomes. This will benefit PDD, which sells low-priced items.
Morgan Stanley lowered its price target in Alibaba to $90, down from $110. It thought that Alibaba could unlock shareholder value through a reorganization and a sizable capital management plan. Instead, the core business is not turning around. Furthermore, the customer management revenue is slow to recover.
Alibaba withdrew its cloud spin-off. This unit will drag the overall business, distracting the company’s management leadership. Now that Alibaba will not spin off the cloud unit, it will not unlock value for shareholders.
The analysts are less bullish on JD.com (JD). They cut the price target by $3.00 to $30. JD does not have a strategy to sell low-priced items. Conversely, Douyin and PDD are both expanding into the electronics and appliance market.
The overall increased competition in e-commerce will hurt all but PDD stock. Investors should be wary of considering JD and BABA stock a deep-value investment.
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