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Stock Analysis & Ideas

Alibaba Slips Below $100, What’s Ahead?

The expected easing of regulatory pressure and an increase in the share repurchase program significantly boosted the ADR (American Depositary Receipt) of the Chinese internet giant Alibaba (NYSE:BABA). However, Alibaba has lost a significant portion of its recent gains and has dropped over 19% over the past month. Further, it fell around 6.7% on Thursday and closed below the $100 a share mark. 

What’s Hurting Alibaba? 

Investors turned their backs on BABA stock following China’s clampdown on its tech giants. Furthermore, an economic slowdown and increased competitive activity took a toll on its growth and, in turn, its share price. 

Though there hasn’t been any significant company-specific news recently, the fear of delisting from the American exchange would have triggered the recent selloff in Alibaba stock. 

Notably, the SEC (Securities and Exchange Commission) recently added JD.com (NASDAQ:JD) to its provisional list of companies that may be removed from the American exchange if they fail to adhere to the HFCAA (Holding Foreign Companies Accountable Act). Shares of JD.com closed about 6% lower on Thursday. 

Meanwhile, China’s leading tech-based mobility platform provider DiDi Global (NYSE:DIDI) recently announced that it plans to delist from the NYSE. 

Bottom Line 

Alibaba stock could continue to remain volatile on delisting fears. Further, the slowdown in its business amid a weak macro environment and increased competition remains a drag. 

Mizuho Securities analyst James Lee lowered his price target on BABA stock as he expects the resurgence of the coronavirus to negatively impact consumer spending, and in turn, Alibaba’s financials in the first half. 

Nevertheless, Alibaba’s growing active consumer base, investments in cloud infrastructure, and international expansion bode well for long-term growth. Of the 18 analysts providing recommendations on BABA stock, 17 recommended a Buy and one had a Sell for a Strong Buy consensus rating. The average Alibaba price target of $170.29 implies 79.9% upside potential to current levels.

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