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Shares of Alibaba Group (NYSE:BABA) are trading lower in pre-open Tuesday in the United States on several reports that are being interpreted as headwinds for the e-commerce giant.
Alibaba's share price closed 3.05% in the red in Hong Kong on the concerns discussed below.
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China Regulatory Pressure Increases
The Chinese government told banks and state-owned enterprises to report their financial exposure to Ant Group, according to Bloomberg News.
As per the report, Chinese regulators have instructed banks and firms to check their exposure to Ant and its businesses. The scrutiny into Jack Ma's fintech giant continues, with banks being told to report their findings as soon as possible.
It remains unknown why Chinese authorities have made such a request, and whether it will result in specific regulatory auctions, the report said.
The move comes a year after China blocked the largest-ever initial public offering (IPO) by Ant, indicating that Chinese tech companies remain under tight scrutiny. Since the start of the crackdown, Chinese tech companies have paid billions of dollars in antitrust fines as a result of the government's decision to reduce the power of tech giants in the country.
Tech stocks in China have been on a decline for a second session today, heading for their worst two-day drop since July as investors raised concerns over further potential restrictions for private enterprises.
U.S. Pressure Sustains
Similarly, the U.S. authorities have included e-commerce sites managed by Alibaba and Tencent to their "notorious market" list.
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"This includes identifying for the first time AliExpress and the WeChat e-commerce ecosystem, two significant China-based online markets that reportedly facilitate substantial trademark counterfeiting," the report said.
In response to the move, Alibaba said it would continue cooperating with governments to ease intellectual property protection concerns.
Analyst Sees More Headwinds Facing Alibaba
Jefferies analyst Atul Goyal believes Japanese conglomerate SoftBank Group could further reduce its stake in Alibaba after offloading 20 million shares in the last quarter. Goyal believes that SoftBank will "need to sell more" this year in order to finance its ambitious buyback plans and private equity investments.
Goyal's comments shouldn't come as a surprise given that SoftBank CEO Masayoshi Son said earlier this month that his company "will definitely be selling a good chunk of assets."
Earnings Ahead
Alibaba is due to report earnings on Thursday with surveyed analysts looking for earnings per share (EPS) of $2.54 on sales of $38.68 billion. For the same period last year, Alibaba reported EPS of $3.35 on revenue of $33.66 billion.
For the full-year period to end May, analysts are looking for a decline in EPS to $8.26 on revenue of $134.98 billion, which would represent a YoY growth of nearly 22%.
Alibaba Stock Price Technical Analysis: Walking a Fine Line
Alibaba stock price is now scheduled to open near $114 today, with the price action occurring just above the key support around the $110 level. A negative surprise in earnings is likely to trigger huge stop losses below $110, with the next support coming in at $87.
Alexander Voigt is the Chief Executive Officer and founder of daytradingz.com. He does not hold any positions in the mentioned stocks.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.