Is Alibaba Group Holding Ltd. A Long Term Stock?

Alibaba’s management continues to reassure investors on the stock’s potential; however, analysts do not seem convinced

During this time when Alibaba Group Holding Ltd. is witnessing serious growth issues, the management of the company is doing their best to provide assurances to shareholders. As reported by Reuters, Joseph C. Tsai, Executive Vice Chairman of the company has said that the management is aware of the low share price level, and added that Alibaba’s fundamentals are much stronger now compared to the time of its initial public offering last year.

Alibaba’s stock price performance shows an entirely different picture, according to recent Alibaba stock news. As the company is reaching one year of its IPO, the stock is declining reaching a price less than its IPO levels. Baba stock closed at $64.90 yesterday, with a 52-week high and low $120 and $58, respectively. The e-commerce giant has a market capitalization of nearly $153.20 billion. Performance of stock shows that the company shares faced the worst ham this year. The stock has shack over 38% this year, according to Alibaba stock analysis.

On Monday, the company established that as consumer spending pull back on a Chinese economy slowdown, the Chinese company’s GMV is expected to drop below estimations. This also applies to Alibaba’s second quarter projections for FY16; while, several experts have warned that the country’s economic slowdown might affect volumes further than the second quarter.

The forecast comes out to be true as experts moves on to reduce the target prices yesterday on baba stock. However, in spite of substantial cuts to price targets, analysts reiterated their Buy rating on stock.

Youssef Squali, an analyst at Cantor Fitzgerald reduced his price target on e-commerce giant’s stock to $88 from previous $95, while reiterated a Buy rating. Likewise, Cheng Cheng, analyst at Pacific Crest, rated it a Buy, but with reduced price target from $94 to $80.

Remarkably, both these downgrades show a short term view. Analysts are optimistic on long term prospects of the company, and expect it gaining substantial gains for shareholders having long positions. Mr. Cheng also stated in his research note: “Domestic macro and emerging market currency fluctuation prompt lower estimates. We still view Alibaba’s prospects positively long-term, but volatility and limited visibility in both China macro and emerging market currency negatively impact our confidence in the short-term.”

Most experts who measure Alibaba’s long term performance agree with the idea above and are still bullish on Alibaba stock. Almost 52 analysts at Bloomberg covered the stock, out of which 45 gave it a Buy, 5 recommend a Hold, while only 2 suggests a Sell. The twelve month average price target is $94.81, almost 50% of upside potential to closing price of $64.90.