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Alibaba stock trades lower on Morgan Stanley downgrade

Shares of Alibaba (BABA) began to slide on Friday after Morgan Stanley analyst Eddy Wang gave the company a downgrade from 'Overweight' to 'Equal weight,' cutting the target price from $110 to $90. The downgrade comes from doubts over the company's performance in its key businesses and the rise of Pinduoduo (PDD). Yahoo Finance Anchors Josh Lipton and Julie Hyman break down the latest development for the company and what it could mean going forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video transcript

JOSH LIPTON: All right, lastly, let's check out shares of Alibaba. They are edging lower. That's after Morgan Stanley downgraded that stock to equal weight from overweight.

Firm also cutting its price target noting a slower than expected fundamental turnaround here. So Morgan Stanley, not a fan, go to equal weight, so the equivalent there of a whole, the target goes to 90. And the analyst did talk about this turnaround, kind of, slow going.

They, of course, decided against spinning off that cloud business, Julie. So Morgan Stanley also emphasizing that saying, that brings, in their words, kind of, uncertainty to the value unlocking from reorganization. Just as interesting by the way, though, is what the analysts do list as what they like. They named PDD as their top pick in that China e-commerce market.

JULIE HYMAN: Yeah that really stood out to me. You've got Alibaba shares trading at a 12-month low and you've got PDD newly ascendant, right, with its popularity of its Temu site. And yesterday, Alibaba's market cap actually fell below--

JOSH LIPTON: I saw that, yep.

JULIE HYMAN: --that of PDD. So now it's interesting to have this Morgan Stanley call, which says that they expect PDD to continue to gain market share in China. So you really have, kind of, a battle between these two companies at this point, not just in the market itself, but in investors' minds as well. If they're not going to buy the basket, if they're trying to figure out which to buy, PDD has gotten a lot more popular.

JOSH LIPTON: Yeah, we should note Morgan Stanley is a bit of an outlier here. It doesn't mean, of course, that they're wrong. But most brokers, interestingly, still do like Baba here, 44 buys, 8 holds, no sells.