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Alibaba: Singles Day a Success but New Internet Guidelines Could Impact Short-Term

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China’s post-pandemic economic recovery got further confirmation on Wednesday. Shaking off any loosely hanging Covid-19 shackles, Alibaba’s (BABA) 11.11 shopping festival proved to be another roaring success.

Boosted by a first-time extra sales window between November 1-3, the annual Double 11 shopping extravaganza hauled in gross merchandise value of ¥498 billion (~$74 billion), amounting to 26% year-over-year growth, in line with the 26% uptick of 2019.

The event drew in 800 million participants, and Alibaba said that during peak activity, the platform was processing 583,000 orders per second. Overall, there were 250,000 brands selling discounted goods, including 31,000 overseas brands.

RBC analyst Mark Mahaney believes the festival’s continued success is a “sign of the durability of Chinese consumers’ consumption rebound since the trough of the pandemic.”

As for Alibaba, the 5-star analyst counts its excursion into offline sales including “big ticket retail like autos and real estate” and investment in the luxury category as “additional growth drivers to the platform in the long run.”

However, Mahaney also warns of the “increasing drumbeat of regulatory oversight on the Internet platforms.”

“We think the Anti-Monopoly Guidelines for the Internet Platforms published on 11/10 (esp. around merchant exclusivity and fair pricing) potentially carries greater implications for BABA vs. its eCommerce competitors, given BABA’s dominant scale in China Internet retail,” the analyst said.

As such, Mahaney expects the stock to come under pressure in the near term, a projection already playing out with shares down by 13% so far this week.

That’s not to say the fundamentals for Alibaba have changed much.

“The long thesis on BABA remains intact,” the analyst said. “We believe the company’s ability to remain a leader in China eCommerce hinges on its ability to sustain the traffic growth and purchasing power of consumers on its platform, as well as continuing to innovate, which we believe BABA is capable of.”

All in all, Mahaney reiterated an Outperform (i.e. Buy) rating on BABA shares along with a $335 price target. Investors could be pocketing a 28% gain, should Mahaney’s thesis play out over the coming months. (To watch Mahaney’s track record, click here)

Regulation or not, Alibaba remains a firm favorite on Wall Street. All 24 recent reviews rate the stock a Buy, culminating in a Strong Buy consensus rating. The forecast is for 29% upside in the year ahead, given the average price target clocks in at $338.55. (See Alibaba stock analysis on TipRanks)

To find good ideas for Chinese stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.