Alibaba Holdings, Inc. BABA stock is now a pale shadow of its old self, ravaged by relentless witch-hunting by local regulators. Is redemption in sight for this once high-flying stock?
Alibaba's Lean Run: Alibaba's shares had a dream run amid the pandemic, when buying shifted online in a big way, driven by lockdown restrictions.
The stock peaked at $319.32 on Oct. 27, 2020 but has been on a downhill journey since then. Alibaba's trouble began late last year, when its founder Jack Ma criticized the government in public for China's stringent regulation, which hurt the financial sector.
Ma's bravado did not go down well with the high-and-mighty in the communist regime, and thus began a series of regulatory crackdowns that did not stop with just Alibaba.
Alibaba was forced to shelve the IPO plans for its sister fintech company, Ant Financial. Ant Financial was also required by the central bank to organize as a bank holding company, thereby bringing it under stricter disclosure and regulatory norms.
Alibaba's flagship ecommerce business was fined for engaging in anticompetitive practices.
Making matters worse was the slowdown in consumer spending in China this year, which impacted the company's core ecommerce business, along with intensifying competition. For the September quarter, Alibaba reported a sharp drop in earnings and also reduced its full-year forecasts.
Every negative headline on regulatory actions served to pressure the stock further. Most recently, an announcement from Chinese ride-hailing giant DiDi Global Inc. DIDI that it is initiating procedures to delist its shares from the U.S. market triggered another round of selling in Alibaba stock.
Reacting to the DiDi news, Alibaba plunged to a multi-year low of $108.70 on Dec. 3. Since hitting the low, the stock has managed to recoup some of its losses, although currently trades with a year-to-date loss of about 46%.
Related Link: Alibaba Vs. JD.com: Who's Winning The Chinese E-Commerce Battle?
Will Alibaba's Investor Day Give The Stock A Thrust? Alibaba is scheduled to hold its virtual investor day event on Dec 16-17, wherein its CEO Daniel Zhang, CFO Maggie Wu, CFO-designate and Deputy CFO Toby Xu and other senior executives are expected to speak.
Incidentally, the company announced earlier this month the elevation of Xu to the CFO role, effective April 1.
"The announcement of Alibaba's CFO transition today is the culmination of extensive preparation over many years and a part of Alibaba's leadership succession planning," said the outgoing CFO Wu. "We are in a relay race, and we must have new generations of talent to take the company forward."
At the investor day event, Alibaba is expected to shed light on the recent performance and outlook for its key businesses that include its core ecommerce business, consisting of Taobao, Tmall and Tmall Import, new retail business Freshippo, local services, including Ele.me food delivery business, Cainiao Logistics and the Alibaba Cloud unit.
It was in the sessions following the investor day in 2020 that the rally in Alibaba shares picked up its pace, culminating in its all-time high. The 2020 event was held virtually on Sept. 28-30.
Barring any other adverse developments, Alibaba's shares could see a build up in momentum in the run-up to the event, given the market acts on a forward-looking basis. If the event does succeed in building confidence among investors, the stock could target the next overhead resistance around the $132 levels. Further up, the stock has its next resistance around the $144-$145 area.
Will Alibaba have some aces up its sleeve that can work magic on the stock?
Alibaba shares closed Friday's session down 0.93% at $125.06.
Related Link: Why This Alibaba Bull Is Taking Down The Price Target For Shares By 30%
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