Alibaba cloud, international segments seen as ‘bright spots’ going into Q3: Baird

The cloud and international segments of Alibaba (NYSE:BABA) are seen as “bright spots” for the Chinese tech giant going into the company’s third-quarter earnings report, research firm Baird said.

“We expect accelerating cloud segment growth given healthy trends in public cloud adoption and strong demand for AI-related services – higher capex too!” analyst Colin Sebastian wrote in a note to clients. “International segment revenues continue to benefit from AliExpress Choice (cross-border/fast shipping) and the company’s investments in marketing to sustain momentum.” Sebastian has an Outperform rating and $110 price target on Alibaba.

Meanwhile, the company’s e-commerce segment is seen as having had a “mixed” quarter, as trends may have slowed down since July. There was a three to five percentage increase in online sales of physical goods, according to data from China’s National Bureau of Statistics, down from low-teens growth in July.

Data for August and September showed “flattish” year-over-year gains, while cumulative online sales increased roughly 8% year-over-year year-to-date.

“While we continue to view Alibaba as a strong technology platform with meaningful scale benefits, we question the pace of improvement in consumer/online spending in China with ongoing strong competition,” Sebastian added.