Alibaba dips on MS downgrade as PDD grabs spot of most valuable Chinese e-commerce firm (updated)

Vipshop Holdings

01/12/2023 14:54

(Updates prices throughout, adds details on P/E ratio in the
penultimate graph)
       Dec 1 (Reuters) - U.S.-listed shares of Alibaba Group
Holding declined on Friday following a Morgan Stanley downgrade
on concerns over slower turnaround in its key businesses, hours
after PDD raced past its rival to become the most valuable
Chinese e-commerce firm.
    Alibaba's stock  BABA.N  slipped 3.2% to $72.5, touching a
fresh one-year low. The shares are down nearly 17% since the
company last month posted in line second-quarter revenue and
scrapped plans to spin off its cloud business. 
    Meanwhile, shares of PDD Holdings  PDD.O  have surged this
week following stellar quarterly results from the Temu parent.
The company closed with a market capitalization of nearly $196
billion on Thursday, surpassing Alibaba's market value of
$190.45 billion.
    Morgan Stanley analysts downgraded Alibaba to "equal-weight"
from "overweight", flagging concerns over softness in its
customer management revenue and cloud business due to sagging
economic recovery in China.
    They also noted uncertainties from Alibaba's decision to
scrap the spin-off of its cloud business.
    Morgan Stanley cut its price target on the stock to $90 from
$110, the second lowest among analysts, as per LSEG data. The
downgrade is the third in as many weeks by Wall Street
brokerages.  
    Alibaba's U.S. shares, down about 18% so far this year, are
set for their third consecutive year of losses.
    On the other hand, Morgan Stanley named PDD as its top pick
in the sector, saying the company is best placed to navigate the
current economic environment with its heavy discounting steps.
    "We expect PDD to continue to gain share in the domestic
market thanks to its favorable business model amid consumers'
behavior shift," Morgan Stanley's Eddy Wang noted, adding that
its cross-border e-commerce business, Temu, is not fully valued
by the market.
    PDD shares were down 2.1% at $144.4 but have surged almost 
80% in 2023, handily outperforming its peers. 
    At 21.4, PDD has the highest forward price-to-earnings ratio
among rivals including JD.com  JD.O  and Vipshop Holdings
 VIPS.N . Alibaba's forward PE was 7.62, according to LSEG
estimates. 

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Share performance of Alibaba, PDD Holdings so far this year    https://tmsnrt.rs/3uGNk9m
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 (Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj
Kalluvila)
 ((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223
8780; outside U.S. +91 80 6182 2787;))