Alibaba Stock Forecast: BABA upgrade helps it hold onto Friday's rally despite poor Chinese economic data

Alibaba stock (BABA) seems to be retaining last Friday's 8.5% rally. At the moment BABA stock is up 0.4% at $88.36 in Monday's premarket. Sentiment has been helped by JPMorgan raising its price target from $75 to $130 and giving the ecommerce giant an overweight rating.

Alibaba Stock News: Price target to $130

JPMorgan upgraded Alibaba stock along with a number of other Chinese competitors like Pinduoduo (PDD) and JD.com (JD) on Monday. The $130 price target gives it nearly 50% upside. This is all the more fascinating, because just two months ago the same team at JPMorgan refered to Chinese stocks as "uninvestible".

“Significant uncertainties facing the sector should begin to abate on the back of recent regulatory announcements," wrote lead analyst Alex Yao. China has aquiesced to US regulators intent on reviewing audits of Chinese corporations listed in the US. Additionally, the Chinese government has called an end to 2021's bout of regulatory scrutiny of large-cap tech companies.

The timing of JPMorgan's report is ironic since China released poor economic data this morning showing that the country may be entering a recession although covid lockdowns are assuredly playing a big part. Retail sales declined 11.1% YoY in April, nearly double the forecast, and industrial production dropped 2.9%. Additionally, the service sector contracted 6.1%. Restaurants, new home starts, land acquisition and vehicle manufacturing all plunged heavily.

Last week Alibaba announced layoffs for about 40% of its Russian joint venture's workforce. It is unclear if there will be further layoffs, and insiders said the move was due to the economic decline in Russia following Western sanctions that are a consequence of its invasion of Ukraine.

BABA key statistics

Alibaba Stock Forecast: Still bearish overall

BABA put in a new range low on May 12, which was lower than the previous range low on April 25. This is a bad sign. With US markets in turmoil and China reporting such decrepit economic data, you can see why observers might not bite on JPMorgan's bullish price target. It might very well make it back to $130 this year, but before it does it could trend lower alongside the US market. Morgan Stanley is now calling 3400 as the bottom for the S&P 500, which would require a further 15% sell-off. Goldman Sachs is mulling a possible US recession in the next 12 months, so it is unsurprising if bulls are not swarming this name.

If sentiment changes for the better, bulls need to conquer the $100 psychologically important level and resistance at $109.76 before moving on to $130. Additionally, the last range high at $120 may provide resistance as well. Support remains at the March 15 low of $73.28. Until $109.76 is broken, it is hard to view BABA with any kind of bullish gaze.

BABA 1-day chart

The author owns shares of Alibaba.

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