Tech stocks are all the rage on Wall Street, but Alibaba (BABA) shares are having a rough November.
In a year when e-commerce stocks like Amazon (AMZN), Etsy and even Jumia (JMIA) shares managed to give 100%+ gains, BABA managed to become the worst performer among top e-commerce websites.
Amazon stock went from $1873 in January to $3,135 where it sits Wednesday morning.
Troubled Jumia went from zero to hero, almost 300% higher than where it was at the beginning of the year.
Etsy shares, probably one of the biggest surprises in coronavirus crisis, gave $3 for every dollar invested in January. Price went from $45 in January to $128.82 on Tuesday.
Alibaba Group Holding (NYSE: BABA) shares were selling for $219.77 in January and closed the day on Tuesday with a $256.80 price tag. That’s ridiculous to put it mildly.
The price falls, but the analysts’ targets rise. Why actually? In their eyes it is very clear: Alibaba still has growth potential in many areas. In my yes doing big business in China is nothing but clear, and BABA shares are paying the price. Or should we say, BABA shareholders.
At UBS, live streaming in particular is seen as a potential driver for future growth. Also in focus: the supermarket chain Sun Art. Goldman Sachs, on the other hand, is betting that Alibaba could use Pinduoduo’s core business and rely more on so-called community purchases. This is where buyers come together – the more, the higher the discount.
Manuel Mühl from DZ Bank had lowered his price target for Alibaba from $335 to $320 just two weeks ago after the cancellation and the latest quarterly figures. The numbers were good, but did not provide any new catalyst, wrote Mühl. The share is still a buy. Mühl particularly emphasized the e-commerce business and the cloud division.
Aaron Kessler of Raymond James has meanwhile thought about the regulatory efforts of the Chinese government. The US magazine Barron’s quoted him as saying: “At the moment we do not believe that the antitrust directives will have a significant impact on Alibaba’s sales.”
But it is not about the sales. Stock price goes up on ..well, on 3things.
-Having great quarterly results
-Having a clear future
Alibaba was a popular mega cap stock but it lost the ground after Chinese government started meddling into their business. Investors stay away from uncertainties.
Alibaba still offers great quarterly results, so this point is -so far so good.
BABA is bad with the last point- They are not having a clear future. If BABA founder decides to run voice his opinion once again CCP might make another move that will take Jack Ma down from the “the most popular Chinese businessman” trone.
The bottom line is that the analysts are right when they give Buy recommendations to Alibaba as it is broadly and attractively positioned in future areas such as e-commerce and the cloud. On the other side, China’s regulatory efforts, may have a negative impact on the price in the short term. So far, however, there is no solid reason to seriously doubt the positive long-term prospects for Alibaba’s operations. The price setback therefore might be an opportunity to go bottom fishing. But where is the bottom when it comes to BABA stock price?