PreMarket Prep Stock Of The Day: Alibaba

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

When the newsflow turns negative on an issue, it is often difficult to turn it around. This scenario applies to Alibaba Group Holdings BABA, the PreMaket Prep Stock of the Day.

The Company: Alibaba is the world's largest online and mobile commerce company, measured by GMV — 5.7 trillion yuan ($846 billion) for the fiscal year ended March 2019.

It operates China's most-visited online marketplaces, including Taobao (consumer-to-consumer) and Tmall (business-to-consumer). Alibaba's China marketplaces accounted for 68% of revenue in fiscal 2019, with Taobao generating revenue through advertising and other merchant data services and Tmall deriving revenue from commission fees.

Additional resources make up the remainder of the revenue, all in much smaller proportions.

Alibaba's Long-Term Price Action: Alibaba debuted in September 2014 at $92.70, and its initial surge took it to $120 by November of that year. 

The issue undercut its IPO and did not find its ultimate low until September 2015 at $57.20.  

The next leg of the rally took the issue to $206.20 by January 2018.  It struggled for the remainder of the year and did not find a major level until January 2019. 

From there, it was straight up, excluding its tumble in March 2020 along with the rest of the market, to its all-time high in October at $319.32.

The Tide Turns: Alibaba was hovering at the $300 area for most of October, and the Street was anxiously anticipating the spinoff of Antgoup, which could have provided a huge windfall to the company.  

Before the open Nov. 2, the Shanghai Stock Exchange suspended the IPO Of Alibaba's Ant Group — and that was just the beginning of the change in the newsflow for the company.

In that session, it swooned from $310.84 to $285.67. By Nov. 9, mainly because of a good third-quarter report a few days prior, it was able to sneak back into the $300 handle, reaching $304. The stock retreated to end that session $290.53.

On that same day, there was speculation as to whether a failed Ant Group IPO could have a severe impact on the company’s valuation.  Also, there was another severe hack of an an Alibaba-backed grocer.

Sell The News On Singles Day Results: Despite record volume for Singles Day, the issue was hammered Nov. 10, falling from $290.53 to $266.54. 

Since that day, any major rallies were sold into, and the issue was teetering just above its low for the recent slide ($255.55) when it ended Wednesday’s session at $255.63.

The Final Straw: Around 7:30 p.m. EST on Wednesday, Alibaba announced it received a Notice of Investigation from the State Administration for Market Regulation of the People's Republic of China relating to the Anti-Monopoly Law of the People's Republic of China. 

The issue tapered off in Wednesday’s after-hours session, declining from $256.18 to $247.42 ahead of the news.

At the commencement of premarket trading, sellers engulfed the issue and have not let up. 

It continued to make new lows Thursday, falling as far as $211.23. 

The stock ended the session down 13.34% at $222. 

Shareholder Dennis Dick Is Scared: In a rare moment in the show’s history, PreMarket Prep co-host Dennis Dick said he's "scared"of the news and trying to decide what to do with his stake in the company. 

“I never like to sell the dip, but I am seriously considering it today,” he said.   

He said later that he originally thought he would keep the issue in his portfolio forever.

The full discussion on the issue from today’s show can be found here:

Disclaimer: Co-host Dennis Dick did sell half of his position in Alibaba.

Alibaba co-founder Jack Ma. Benzinga file photo by Dustin Blitchok.