Alibaba has put an end to its ambitions of breaking into China’s entertainment industry and will be shutting down its Xiami Music app on February 5, according to CNN Business.
Alibaba (BABA) bought Xiami in 2013, hoping to establish itself as a leader in China’s music and entertainment market, however, CNN Business has reported that shortly after the acquisition, Chinese regulators began cracking down on music copyright infringements.
As a result, music streaming services in China were forced to remove more than two million unauthorized songs from their websites and apps over a three-week period in 2015, according to the National Copyright Administration, China’s top copyright regulator.
The CNN Business report acknowledges that Alibaba also faced tough competition from entertainment giant Tencent Holdings, who established its own music entertainment division with popular streaming platforms Kugou Music, QQ Music and Kuwo Music.
According to data intelligence company, TalkingData, headquartered in Beijing, CNN Business has discovered that Xiami currently only owns around 2% of China’s music streaming market.
Alibaba is once again facing regulatory challenges as its affiliate, Ant Group, is now facing a Chinese antitrust investigation and has been ordered by regulators to overhaul large parts of its operations.
Meanwhile, Jack Ma, Alibaba’s billionaire founder has reportedly disappeared, and hasn’t been seen in public for more than two months. (See BABA stock analysis on TipRanks)
Oppenheimer analyst Jason Helfstein assigned a Buy rating on the BABA stock 2 days ago and lowered his price target from $330 to $320. This implies upside potential of around 38%.
Helfstein reduced price target after Chinese regulators imposed five regulatory requirements on the company, which effectively lower Helfstein’s valuation of Ant Group from $200 billion to $150 billion. He also believes that the planned IPO of Ant Group now seems unlikely to go ahead in 2021.
Overall, consensus among analysts is a Strong Buy with all 19 analysts who have offered a rating on the stock in the past three months recommending a Buy. The average price target of $342.07 suggests upside potential of around 46% over the next 12 months.
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