Alibaba Plunged More Than 30% From 2018 High; Analysts Predict Continuing Downward Trend

Alibaba
Alibaba Group co-founder and Executive Chairman Jack Ma attends the World Trade Organization (WTO) Forum "Trade 2030" in Geneva, Switzerland, October 2, 2018.
(Photo: REUTERS/Denis Balibouse)

Alibaba's Group Holding Ltd. has seen a huge slump by more than 33 percent fresh from its 2018 high, and according to market analysts, the company's stock might continue to tread on a free fall by 11 percent as concerns on e-commerce sales trending below expectations as well as the undeniable effects of the escalating tit-for-tat trade conflict between China and the US.

According to a report from Seeking Alpha, stocks of the Jack Ma-founded firm, along with those from other Chinese companies, continue to experience heavy selling in the market.

As pointed out by the publication, there's more to what the trade war has done to affect this recent stock market trend as there's also been a general sector rotation from tech into bonds and real estate investment trusts (REITs) happening which further escalates the situation.

In Alibaba's case, the Chinese e-commerce behemoth lost more than 30 percent of its market cap of almost USD$400 billion only within 3 months. This is despite the fact that the company has continued to register a rapid growth rate as of late.

Price Target Cuts

A number of Wall Street analysts are cutting down their price targets on Alibaba stock on Wednesday after it closed at 138.29, down by 5.9 percent, this week, a report from Investors said.

Analyst Aaron Kessler of Raymond James settles his Alibaba stock from 280 to 260, although maintaining a strong buy rating. For the next fiscal year of 2019, the analyst predicted a revenue growth estimate of 55 percent from 60 percent.

Hans Chung of Keybanc Capital Markets cut a much lower price target stock to 215 from an earlier 220 based on the reported declining e-commerce expectations as well as the looming effects of China-US trade spat.

The same ballpark figure was given by Barclays' Gregory Zhao who further lowered Q2 estimates for the 2019 fiscal year. The price cut, according to the analyst, reflects much wider economic concerns that the Chinese market is facing as well as the company's aggressive investments in new initiatives.

Like Alibaba, the publication cited several other Chinese stocks undergoing similar situations. Weibo, for example, took a plunge by 69 percent from its all-time high of 142.12 on February this year. JD.com, meanwhile, dipped by 55 percent from its record high of 50.68 set on January. Tencent Holdings is also down 42 percent from its January set high of 61.

Meanwhile, an Investopedia report said that the recent stock trend is revolving around technical support of USD$142. If it stays below this level, Alibaba's stock could see more drop as low as USD$125 or around 11 percent from its current price of USD$140.50.

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