4 big analyst cuts: Alibaba a potential 'value trap,' says Bernstein

Here is your Pro Recap of the biggest analyst cuts you may have missed since yesterday: downgrades at Uber, Alibaba, Veeva Systems, and Walgreens Boots Alliance.

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Alibaba cut to Market Perform on 'value trap' risk

Bernstein moved to a neutral stance, downgrading Alibaba (NYSE:BABA) to Market Perform from Outperform with a price target of $98.00 (from $130.00) despite the stock's "very cheap" valuation.

The firm cited concerns about a potential "value trap" risk as quarterly comps are about to get harder from here. According to the firm, Alibaba's problem goes beyond the lack of user traffic and includes the issue of merchant crowding, leading to increased search costs and putting pressure on merchant ROI.

“We're unconvinced that low multiples and modest EPS accretion can drive durable share price performance if the competitive problem in core e-commerce remains unresolved,” Bernstein concluded.

Uber trimmed at Daiwa Securities

Uber Technologies (NYSE:UBER) shares fell more than 1% pre-market today after Daiwa Securities downgraded the company to Outperform from Buy with a price target of $51.00 (from $42.00).

Despite the firm increasing its estimates and price target, it cut the company's rating due to strong outperformance in stock, which is up 81% YTD, versus a 13% increase in the S&P500.

The increase in price target reflects higher EBITDA estimates and lower weighted average cost of capital (WACC). The firm’s 2024 adjusted EBITDA was raised to $5.2 billion from $5B prior, reflecting higher bookings growth at Mobility operations and increased profitability at Delivery. Meanwhile, a consistent free cash flow, potential S&P 500 inclusion, and recognized Mobility & Delivery synergies contributed to reducing the WACC to 10.5% from the previous 11.5%.

The firm believes Uber’s global scale and cross-platform synergies make it best positioned to capitalize on increasing penetration while navigating potential downturns and regulatory cost pressures.

2 more downgrades

Veeva Systems (NYSE:VEEV) shares dropped more than 3% yesterday after Morgan Stanley downgraded the company to Underweight from Equalweight with a price target of $181.00.

Deutsche Bank downgraded Walgreens Boots Alliance (NASDAQ:WBA) to Hold from Buy and cut its price target to $34.00 from $46.00.

Shares plunged more than 9% yesterday after the company reported soft Q3 earnings and cut its guidance.

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