Benzinga | Jan 7, 2022 01:06PM EST

Here's Why JP Morgan Sees Sharp Upside In Alibaba Despite Cutting Price Target

* JPMorgan analyst Alex Yao lowered the price target on Alibaba Group Holding (NYSE:BABA) to $180 from $210 and kept an Overweight rating on the shares. The price target implies an upside of 42.1%.

* The analyst is "turning more cautious" on China's online consumption outlook and cut Alibaba's December quarter customer management revenue growth assumption to negative 2% year-over-year from positive 5%.

* Yao forecasts the negative CMR growth will end in the June 2022 quarter, "admittedly with low visibility."

* On the other hand, the analyst expects a further sequential step-up in strategic investment in China commerce in the December quarter, followed by a gradual loss narrowing starting from the March quarter.

* Yao believes earnings revisions will be the most crucial share price driver of Alibaba in the next few quarters, besides policy stimulus.

* The analyst thinks the stock will continue to be under pressure shortly, "despite low valuations."

* Price Action: BABA shares traded higher by 2.94% at $130.35 in the market session on the last check Friday.