Alibaba Faces Rare Downgrade as PDD Surpasses It in Market Value

Alibaba Group Holding Ltd. received an unusual downgrade from Wall Street on the same day it ceded its position as China’s most valuable e-commerce company to one of its primary competitors.

Morgan Stanley downgraded Alibaba’s American depositary receipts (ADRs) from overweight to equal-weight, concurrently lowering the price target from $110 to $90.

This marks the first downgrade for Alibaba’s US-listed shares since late June, according to Bloomberg data.

Analysts at Morgan Stanley, including Eddy Wang and Gary Yu, expressed concerns about Alibaba’s slower-than-expected turnaround and the uncertainty introduced by the decision to withdraw the spinoff of its cloud business.

In a report dated Thursday, they stated, “brings uncertainty to the value-unlocking from reorganization.”

Simultaneously, Morgan Stanley named PDD Holdings Inc. as its top pick in China’s e-commerce sector, citing its favorable positioning amid the growing trend of consumer price sensitivity.

PDD, an eight-year-old upstart recognized for its successful Temu marketplace, closed Thursday trading in the US with a market capitalization of approximately $196 billion, surpassing Alibaba’s value for the first time.

PDD has experienced a remarkable 80% surge in value this year, while Alibaba has faced a 15% decline in US trading.

Although Alibaba has been a dominant force in China’s online shopping landscape for over a decade, PDD has managed to attract customers with competitive pricing and expand its reach globally.

Morgan Stanley’s move to downgrade Alibaba and elevate PDD underscores the shifting dynamics within China’s e-commerce sector.

Despite this downgrade, brokers remain predominantly bullish on Alibaba, with 44 buy ratings and eight hold recommendations for its ADRs. In comparison, PDD has 52 buy ratings and three holds.