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However, it is a case where the level of hysteria has been able to divert the stock, thus separating it from any semblance of value in favor of glittering titles.
It happens. Stand in front of this train at your own risk. At the same time, keep in mind that hysteria caused by fear does not last forever. Once all the dust settles, investors will realize that even the recent declines in Alibaba's stock were somehow hateful hatred.
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Disturbing headlines
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Just for the record, the l & # 39; BABA action is not the only name of Chinese technology under fire recently. Baidu (NASDAQ:BIDU) also burns, with JD.Com (NASDAQ:JD). The fallout from the tariff war is at least partly responsible for the adverse winds, although other forces are at work. "Data-reactid =" 16 "> For the record, the action BABA is not the only Chinese technology name under fire recently. Baidu (NASDAQ:BIDU) also burns, with JD.Com (NASDAQ:JD). The fallout from the tariff war has at least some of the credit / blame for the headwind, although other forces are at work.
For investors however, the reason is irrelevant. The only thing that worries them is: what's next for Alibaba?
It is difficult to answer this question when Alibaba is faced with new concerns.
Barclays analyst Gregory Zhao provided one, in a way, by lowering his price target on BABA stocks earlier this week. KeyBanc did the same thing at about the same time. Ditto for Deutsche Bank, where analyst Han Joon Kim lowered his target of 196 USD to 189 USD, fearing that sales will be lower for the quarter ended than initially expected, because of the economic engine of China. The Chinese central bank's recent decision to lower interest rates confirms this economic slowdown.
At the same time, the analyst community decided to reconsider its earnings growth forecast for Alibaba, which was only 8% for the current year. This perspective was in the mid-20s just a few months ago.
It's a dark picture, but investors risk dropping the BABA action too far.
Look what's wrong
Yes, analysts may be reducing their price targets on the BABA stock. However, this is a case in which investors would be well advised to take a step back and look at what analysts do not do, and where the Alibaba share trades in relation to their calls.
Click to enlarge
First, despite many reasons and possibilities, the analyst community does not reduce its collective appeal to Alibaba. That was and it's still a little better than a "buy", as it's been the case for a few years now.
Second, and this is a close second, the price target for the BABA share of $ 225.19 is still higher than the current price of the Alibaba share.
None of this suggests that analysts can not go wrong. On average together, they are usually right. Most often, it is investors who lose perspective, catapulting or changing the price of an action in relation to a semblance of reasonable value.
And it's no exaggeration to think that the fall in BABA shares since June has been unusually volatile, even by Alibaba stock standards. The sale also resulted in BABA's shares at a prospective P / E of only 19.0. Anyone is not very cheap, but it's an assessment that is at the bottom of Alibaba's typical assessment.
Final result for the BABA stock
The backdrop can be compelling, but do not read the message badly. Alibaba shares are down, and it is not because the bullish thesis makes sense that sellers are ready to calm down for the moment.
On the other hand, the bullish argument in favor of the BABA stock does not stand up. If and when the rhetoric of doubt and worry over China's technology stocks fades and the current correction has finally reached its peak, Alibaba may well become one of the main prospects in which it would be possible to return.
Just prepare for the possibility that the stock itself will end any comment. That's why you will have to look at the chart as much as you watch the titles.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "At the time of writing these lines, James Brumley did not hold any positions on the aforementioned securities. You can follow him on Twitter at @ jbrumley."data-reactid =" 46 ">At the time of writing these lines, James Brumley did not hold any positions on the aforementioned securities. You can follow him on Twitter at @ jbrumley.
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