Large Layoffs at Alibaba-Russia Joint Venture
Market News

Large Layoffs at Alibaba-Russia Joint Venture

Per a report from Nikkei Asia, employee retrenchment has been aggravated in some companies due to the Russia-Ukraine conflict. Recently, around 40% of employees in the joint venture of Alibaba Group Holding Limited (NYSE: BABA) in Russia have been laid off on the back of negative impact from cross-border business due to the ongoing war. 

Shares of the Chinese ecommerce giant rose 8.51% on Friday at the close. 

Layoff Details 

Alibaba owns a 48% stake in the joint venture named AliExpress Russia, which employed 1,000 employees before March. The commercial segment has been hit hard by the recent round of layoffs. Considerably, the website was the most popular online marketplace among shoppers in Russia last year.

An unidentified employee commented, “I am not sure there will be further layoffs, which will depend on logistics, the company’s adjusted loss before interest, tax and amortization, investment, and consequences of the Ukraine crisis.” 

Background 

Russia has remained the largest market for AliExpress since 2013. Six years later, this segment was spun into a joint venture between Alibaba and Russian investment entities. Apart from Alibaba, joint partners in the venture included internet company VK Group, telecom giant USM International, and sovereign wealth fund RDIF. 

This March, AliExpress Russia disclosed its plans to double the staff in Moscow and to employ over 6,000 staff in logistics and support services in 2022. Unfortunately for the venture, the unanticipated geopolitical tensions soiled the plan.

Also, per media reports, DingTalk, Alibaba’s workplace communication software, might lay off about 30% of its employees on the back of huge losses. 

No comments were released by either AliExpress Russia and DingTalk. 

Wall Street’s Take 

Recently, Mizuho Securities analyst James Lee reiterated a Buy rating on Alibaba but lowered his price target to $160 from $180, now representing an 81.84% upside potential. 

In a note to investors, Lee said that all segments of the internet in China, including ecommerce, advertising, and cloud computing are expected to be negatively impacted in the first half of 2022.  

Challenging conditions are likely to prevail on the back of disruptions in consumer spending and business activities due to COVID-19 restrictions in China, the analyst added. 

Consensus among analysts is a Strong Buy based on 17 Buys versus one Sell. The average Alibaba stock forecast of $170.29 implies 93.53% upside potential from current levels. However, shares have lost 58.31% over the past year. 

Website Traffic 

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), offers insight into Alibaba’s performance. 

According to the tool, a website traffic downtrend was visible. In fiscal Q4 2022, total estimated visits on aliexpress.com showed a decreasing trend, on a global basis, representing an 18.71% fall from the third quarter. This, in turn, indicates that the company might report bleak revenues in the to-be-reported quarter on May 26. 

Learn more about the Website Traffic tool in this video by Youtube sensation Tom Nash.

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