Loop Capital analysts reassured Alibaba (NYSE:BABA) investors, stating they should not be concerned by the recent downturn in PDD stock.
In a note to clients, Loop Capital stated: "We are not overly concerned about a disappointing outlook from competitor PDD and the meaningful devaluation in the company's stock this week."
The firm emphasized that despite PDD's disappointing outlook and significant devaluation this week, Alibaba remains on a positive trajectory.
The firm reiterated its Buy rating on Alibaba and maintained a price target of $115.
Loop's analysts added that Alibaba's path forward is bolstered by ongoing share stabilization, monetization efforts, stock repurchase leverage, and the likely inclusion in the Hong Kong Stock Connect.
They believe PDD's recent challenges stem from overly aggressive monetization strategies and issues with its seller community, which could potentially attract regulatory scrutiny.
They note that over the past two years, PDD's monetization rate has nearly doubled, while Alibaba's Taobao Tmall has seen a decline in its take rate.
Despite PDD's plans to reduce transaction fees by ¥10 billion to address these issues, Loop Capital analysts do not expect this move to significantly resolve PDD's challenges or lead to heightened price competition.
They emphasized that Alibaba's strategic position remains strong, especially in contrast to PDD's current struggles.
Loop Capital's confidence in Alibaba's prospects is underpinned by its belief that the company's efforts in various areas, including monetization and stock repurchase, will continue to drive value for shareholders.
Loop Capital's analysts maintain a positive outlook for Alibaba, urging investors to focus on the company's promising future rather than the turbulence faced by Pinduoduo (NASDAQ:PDD). "We continue to see a positive event path ahead for Alibaba," the firm wrote.