Alibaba stock has taken investors on a wild ride over the past year.
Qilai Shen/Bloomberg
Alibaba investors should be used to wild rides by now. After the Chinese e-commerce giant lost almost a quarter of its market value in the last month alone, the stock looked to be staging a comeback this week, posting its biggest one-day gain in four years.
That momentum seems to have disappeared. Alibaba
‘s (ticker: BABA) U.S.-listed stock was down 1% Wednesday, with its Hong Kong-listed shares (9988.H.K.) slumping 4.7%. While Alibaba stock surged a cumulative 12% Monday and Tuesday, that jump belies the fact that the shares are in rough shape—trading at their lowest levels since spring 2017.
The buoyancy seen in the last two days seemed to be linked to news about a management shakeup, with a new chief financial officer announced alongside a restructuring of its core commerce division. In retrospect, those changes seem unlikely to be enough to shift the macro picture for the company.
Along with much of the rest of the Chinese technology sector, Alibaba is facing intense regulatory scrutiny in both Beijing and Washington. The stock has steadily moved lower over the past year amid a wave of crackdowns on the tech sector in China, which have come as President Xi Jinping tightens his grip over the country’s economy.
More recently, concerns are mounting over the future of U.S.-listed Chinese companies and whether groups like Alibaba will be pushed to ditch their listings in New York. DiDi Global (DIDI), a Chinese ride-hailing company, announced last week that it would delist from the New York Stock Exchange in favor of a listing in Hong Kong.
A report from the Financial Times Wednesday, citing anonymous sources, re-upped the pressure, outlining plans in China to heavily restrict the type of corporate structure used by Alibaba and its peers to list overseas. While the report said the plans weren’t expected to apply to existing companies, it underscores that this issue isn’t going away any time soon.
The disappointing initial public offering of Chinese social media giant Weibo in Hong Kong Wednesday—the stock dropped 7%—may have added fuel to the fire. Weibo (ticker: WB) has a primary listing on the Nasdaq, where it was down 3.2%.
An underwhelming trading debut in Hong Kong for Weibo wouldn’t be welcomed by shareholders in other U.S.-listed Chinese tech companies, who are mulling over whether their holdings may soon be shifting across the Pacific.
And Alibaba’s shareholders have found another, key reason to sour on the stock for reasons far divorced from any regulatory pressure: the financial nuts and bolts. Its latest quarterly earnings triggered a wave of price target cuts by Wall Street, with reratings on the stock rolling in from analysts by the dozen, literally.
Crucially, it looks like growth is slowing at the company: Alibaba missed sales and earnings expectations in the last quarter, cut its outlook for the full year, and revealed just how badly profits were pinched by eroding margins.
Yet there remain reasons to be bullish on Alibaba. It’s still the dominant player in Chinese e-commerce, and has been making promising investments in new business areas. There’s also a compelling cloud computing business, and snalysts see market share gains coming in food delivery and offline retail.
Write to Jack Denton at [email protected]
