Wall Street still sour on Alibaba’s shares

September 13 23:57 2015

Alibaba investors may be feeling a bit disoriented by the deluge of recent news about the company. Some has been bad, especially a warning Tuesday that third-quarter sales volume on the company’s e-commerce sites is tracking below expectations. Some has been good, including plans for a new sports-related business and a report late last week that the company’s two largest individual shareholders — chairman Jack Ma and vice-chair Joseph Tsai — are looking to borrow money against their stakes, rather than sell some of them off.dbpix-alibaba1-tmagArticle

And on Wednesday, Yahoo announced that the Internal Revenue Service declined to endorse its plan to spin off its huge Alibaba stake on a tax-free basis. Alibaba shares jumped over 5% on the news. (They are down about 0.4% in pre-market trading Thursday.) That leap came even though two analysts cut their price targets on the company, a welcome move after the volatile stock scraped new lows earlier this week.

Yet amid the cross-currents that have buffeted the shares, one thing has remained consistent: Wall Street continues to sour on Alibaba’s profitability this year. The analysts who cover Alibaba shares have reduced their profit estimates on the company significantly since its earnings call in late July. The biggest cuts have come within the past month. The average earnings estimate for the second half of 2015 has dropped to $1.45 a share, from $1.55 a month ago and $1.58 in June.

Look for those numbers to come down further now that Pacific Crest Securities and Cantor Fitzgerald both hacked down their price targets on the stock — although they maintained their buy ratings. Cantor’s Youssef Squali dropped his target to $88 a share from $95, while Cheng Cheng at Pacific Crest slashed it to $80 from $94. As reported here in the past, Wall Street analysts rarely change their buy recommendations on stocks issued by large, newly-public tech companies.