How do you lose $20 billion? If you’re Alibaba (NYSE:BABA), one of the biggest names in Chinese stocks and e-retail around, it’s disturbingly simple: you don’t list your cloud business. The Cloud Intelligence Group will not get its own spinoff after all, and that was enough to send Alibaba down in Friday afternoon’s trading session.
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Alibaba canceled plans to give its Cloud Intelligence Group a public listing thanks mainly to the U.S.’ export restrictions on advanced chips sent to the Chinese market, among others. The restrictions in question, Alibaba reps noted, “…created uncertainties for the prospects of Cloud Intelligence Group,” and that caused Alibaba to pull back, along with its investors, who took $20 billion in market cap out of Alibaba’s shares at one point. Instead, Alibaba will now turn its attention to “…developing a sustainable growth model based on emerging AI-driven demand for networked and highly-scaled cloud computing services.”
But It’s Not All Bad for BABA
Granted, the loss of $20 billion dollars and the opportunity of having a cloud-based unit to invest in stung Alibaba and its investors. However, there was one bright spot to report: Alibaba’s film and music division. Reports note that the outfit had a “strong summer box office,” thanks to recent releases like “No More Bets” and “Lost in the Stars,” as well as the biggest animated hit of the year for the Chinese market, “Chang’an.” This, along with some solid musical acts—including the 10th-anniversary concert for the pop group TFBoys—gave Alibaba a little extra spark to make up for the cloud-based losses.
Is Alibaba a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on BABA stock based on 15 Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 2.77% loss in its share price over the past year, the average BABA price target of $127.56 per share implies 63% upside potential.
