Alibaba Group Holding faced a 3.2% decline in its U.S.-listed shares after a Morgan Stanley downgrade expressing concerns over a slower business turnaround. This downgrade comes shortly after PDD (Pinduoduo) surpassed Alibaba, becoming the most valuable Chinese e-commerce firm.
Alibaba’s stock hit a one-year low at $72.5, marking a nearly 17% decline since the company reported second-quarter revenue in line with expectations and abandoned plans to spin off its cloud business.
In contrast, PDD Holdings experienced a surge in shares this week following impressive quarterly results from its parent company, Temu. Closing with a market capitalization of nearly $196 billion on Thursday, PDD surpassed Alibaba’s market value of $190.45 billion.
Morgan Stanley analysts downgraded Alibaba to «equal-weight» from «overweight,» citing concerns about softness in customer management revenue and the cloud business amid a sluggish economic recovery in China. They also highlighted uncertainties arising from Alibaba’s decision to cancel the spin-off of its cloud business. Morgan Stanley’s price target for Alibaba was adjusted to $90 from $110, the second lowest among analysts, as per LSEG data. This marks the third downgrade by Wall Street brokerages in as many weeks.
Alibaba’s U.S. shares, down approximately 18% year-to-date, seem poised for their third consecutive year of losses.
Contrastingly, Morgan Stanley named PDD as its top pick in the sector, citing the company’s adeptness in navigating the current economic environment through strategic discounting measures. Eddy Wang of Morgan Stanley noted, «We expect PDD to continue to gain share in the domestic market thanks to its favorable business model amid consumers’ behavior shift.» He added that PDD’s cross-border e-commerce business, Temu, is not fully valued by the market.
PDD shares experienced a 2.1% dip at $144.4 but have shown an impressive surge of almost 80% in 2023, outperforming its peers. With a forward price-to-earnings ratio of 21.4, PDD leads among rivals, including JD.com and Vipshop Holdings. In comparison, Alibaba’s forward PE was recorded at 7.62, according to LSEG estimates.
