Goldman Sachs is lowering Alibaba (NYSE:BABA) stock to Buy from Conviction Buy as the company boosts spending.
Analyst Piyush Mubayi is cutting the price target to $215 per share from $252.
The stock is slightly lower in premarket trading.
"At the time when retail spending slows down and competitive intensity levels up, BABA has been increasing investments to 1) acquire new users, 2) build multiple traffic sources, and 3) raise merchant subsidies in the shorter term," Mubayi writes in a note.
"We expect revenue growth (ex. SunArt) to decelerate to 13%/16% in 3QFY22E/4QFY22E, with CMR revenue growth in 2HFY22E 3.3% yoy vs. 3.4% in 2QFY22. The lower CMR monetization rate and stepped-up strategic investments will drag profitability over the next 2 quarters before growth recovers in FY23E, when both revenue/earnings grow >20%."
But Goldman still expects the company to continue "aggressive buybacks."