© Reuters. FILE PHOTO: The shopping cart is seen in front of the Alibaba logo in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) –stocks listed in the United States of Ali Baba (NYSE:) Group Holding fell on Friday following a downgrade from Morgan Stanley on concerns about a slower recovery in its key businesses, hours after PDD overtook its rival to become the most valuable Chinese e-commerce company.
Alibaba shares fell 3.2% to $72.5, hitting a new one-year low. Shares are down nearly 17% since the company last month posted second-quarter online revenue and scrapped plans to spin off its cloud business.
Meanwhile, PDD Holdings shares have risen this week following parent Temu's excellent quarterly results. The company closed Thursday with a market capitalization of nearly $196 billion, surpassing Alibaba's market value of $190.45 billion.
Morgan Stanley analysts downgraded Alibaba to “equal weight” from “overweight,” citing concerns about weakness in its customer service revenue and cloud business due to the weakening economic recovery in China.
They also noted uncertainties arising from Alibaba's decision to rule out spinning off its cloud business.
Morgan Stanley lowered its price target on the stock to $90 from $110, the second-lowest among analysts, according to LSEG data. The downgrade is the third in as many weeks by Wall Street brokerages.
Alibaba's U.S. shares, which have fallen about 18% so far this year, are headed for their third straight year of losses.
On the other hand, Morgan Stanley named PDD as its top pick in the sector, saying the company is best positioned to navigate the current economic environment with its steep discounts.
“We expect PDD to continue gaining share in the domestic market thanks to its favorable business model amid changing consumer behavior,” said Morgan Stanley's Eddy Wang, adding that its cross-border e-commerce business, Temu, is not fully operational. valued by the market.
PDD stock fell 2.1% to $144.4, but is up nearly 80% in 2023, comfortably outperforming its peers.
At 21.4, PDD has the highest forward price-to-earnings ratio among rivals such as JD (NASDAQ:).com and Vipshop (NYSE:) Holdings. Alibaba's Forward PE was 7.62, according to LSEG estimates.
