Shares of Alibaba Group Holding Limited (NYSE: BABA), Baidu Inc. (NASDAQ: BIDU), Tencent Holdings Inc. (OTC: TCEHY), Xpeng Inc. (NYSE: XPEV) and Li Auto Inc. (NASDAQ: LI) fell in Hong Kong on Friday, while JD.Com Inc. (NASDAQ: JD) traded higher.
What’s Moving: Chinese e-commerce giant Alibaba’s shares traded 0.9% lower at HKD 122.30 in Hong Kong, while peer JD.Com’s shares have risen 0.8% to HKD 313.40.
See Also: How To Buy Alibaba (BABA) Stock
Technology company Baidu’s shares have lost 1.2% to HKD 145.40, while tech conglomerate Tencent’s shares are down 0.3% to HKD 471.40.
Electric vehicle maker Xpeng’s shares have fallen 3.6% to HKD 182.00 and peer Li Auto’s shares traded 1.0% lower at HKD 123.20.
Hong Kong’s benchmark Hang Seng Index opened lower on Friday and was down 0.4% at the time of writing. The index closed almost 1.1% higher on Thursday.
Why Is It Moving? The Hang Seng Index fell after three straight days of gains as Chinese property developers China Evergrande Group (OTC: EGRNY) and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt.
Fitch Ratings has downgraded Evergrande and Kaisa to “restricted default” after the two companies missed key deadlines and failed to make payments on dollar bonds this week.
The failures could trigger a cross-default in debt owed by the two developers. Evergrande has $19.2 billion of dollar bonds outstanding while Kaisa owes $11.6 billion, according to a report by Bloomberg.
In addition, the Chinese yuan fell after the People’s Bank of China (PBOC) raised the reserve requirement ratio on foreign currencies for a second time this year, Reuters reported.
The move is seen as an attempt by the central bank to slow the rapid appreciation of the yuan, which has risen more than 2% against the dollar since late July.
The offshore yuan traded at 6.3720 per dollar, its weakest level this month.
Shares of Chinese companies closed mostly lower in U.S. trading on Thursday after the major averages in the U.S. ended mostly lower following three straight days of gains. Investors turned cautious as they looked ahead to the release of key U.S. inflation data on Friday.
Alibaba’s shares closed 0.9% lower, while Nio’s shares ended lower by almost 2.9%.
Read Next: Why Rotation Out Of Chinese Tech Stocks Bodes Well For Apple, Microsoft And US Tech Stocks
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One of most disappointing emerging market largecap growth stories of the year has to be Alibaba (BABA). The stock has declined almost 50% year-to-date and well over 50% from its highs achieved in February of 2021.
BABA operates leading e-commerce websites such as Taobao and TMall as well as B2B businesses throughout China. Revenues are derived from commissions, marketing services, subscription fees, cloud computing and software operations, and logistics services.
The company also owns retail chains, and partners with “logistics and payment companies to offer delivery, warehousing, payment & financing services for its users and merchants.” It also has a 33% stake in Ant Technology.
Alibaba has been called the Amazon (AMZN), Ebay (EBAY) Paypal (PYPL) and even Google (GOOGL) of China as it reaches many avenues of consumer spending and technology.
I am bullish on BABA as I believe Alibaba will remain the top eCommerce and cloud platform in China despite ongoing risks. It has an industry leadership stance that will be hard to duplicate and surpass. The stocks dramatic decline in 2021 and subsequent low valuation levels provides a reasonable margin of safety. (See Analysts’ Top Stocks on TipRanks)
China CrackdownThe Chinese Communist Party (CCP) has been cracking down on large conglomerates and monopolies in China, and BABA has been caught up in that turmoil.
More than $1 trillion was erased off the collective market capitalization of some of the world’s largest technology and Internet groups in the country. Companies operating in areas such as fintech-lending, e-commerce, social media, and even self-driving cars must rethink how they generate revenues and handle data.
In addition, BABA is not immune to COVID-19 pandemic troubles, global supply chain and logistics problems, and Jack Ma comments.
This was compounded by disappointing quarterly financial performance along with weak guidance for the rest of the year.
Charlie MungerThis year, longtime Warren Buffet partner Charlie Munger famously bought into BABA during 2021 at prices much higher than the stock is trading today.
This was done through his holding company Daily Journal Corporation (DJCO). In October, Munger averaged down by purchasing an additional 136,000 shares to bring the total ownership to approximately 302,000 shares.
The Buffett-Munger holding period for its investments is often characterized as “forever.” This means buying great companies and letting their values compound over time. This interesting discovery has raised speculation that maybe Buffett himself and his investment team may eventually take a stake in BABA at some point.
ANT Group IPOANT Group, which is 33% owned by Alibaba, is a fintech and payments company which houses the Alipay app.
ANT was set to go public in late 2020 year but the listing was pulled by Chinese regulators at the last minute. The Wall Street Journal said “the ongoing probe is looking into the regulators who approved the listing, local officials who promoted the listing, and the large state firms that would financially benefit from the offering.”
This was a significant disappointment to Alibaba as the value recognition of their 33% stake could have been material. Nonetheless, this remains a valuable holding for BABA that may be monetized at some point in the future.
ValuationBased on EPS estimates, BABA is trading at only 14.9x current-year earnings and 13x next-year earnings.
Wall Street’s TakeTurning to Wall Street, BABA has a Strong Buy consensus rating based on 22 Buy ratings and two Hold ratings assigned in the past three months. At $210.18, the average BABA price target implies 67.6% upside potential.
Disclosure: At the time of publication, Tom Kerr did not own shares of any stocks mentioned above.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
Online commerce kingpin Alibaba (BABA) has been under fire from several directions lately. A shaky Chinese economy, a hostile regulatory environment, and more have given investors some pause in recent days. Perhaps sensing the mood shift, Alibaba recently made some moves designed to provide a clean slate to work from. Investors seem to be taking the news well so far.
I was bearish on Alibaba back in late November. Though I maintain many of my earlier concerns, Alibaba's move could be just what was needed. (See Analysts' Top Stocks on TipRanks)
Looking at Alibaba's stock charts for the year so far shows slight improvement over late November. The company spent most of November either plateaued in the $160 range or in the middle of a plunge.
A small recovery kicked in just ahead of Thanksgiving, but the decline was back on immediately afterward. Between November 15 and December 1, the company's share price lost around 20% of its value. (See Alibaba stock charts on TipRanks.)
Alibaba's latest move, however, may be a breath of fresh air that the company desperately needs right now. Faced with plunging stock prices, Alibaba has taken tack that many "Dilbert" strips over the years endorse: reorganization.
The company revamped its operations, creating two new business units to handle e-commerce operations. One will focus on domestic e-commerce, while the other will tackle international operations. The move will allow the company to improve its agility. That's a common problem as businesses grow and are less able to make rapid changes to meet conditions on the ground.
Additionally, Maggie Wu will no longer be the company's chief financial officer starting this April. Her deputy, Toby Xu, will take over instead. The company cited the earlier-established leadership succession plan as the reason for the move. Xu was formerly part of PWC and has been the company's deputy CFO since July of 2019.
Shuffling Deck Chairs on the Titanic?There are two ways to think about the recent moves at Alibaba.
Alibaba's recent move could be the greatest thing that could happen to it. By shifting its e-commerce operations into domestic and international, the company can improve its speed of response to conditions on the ground. The recent events at Evergrande have left many Chinese to wonder what will happen next. Alibaba improving its preparations in the face of such a downturn could save it a lot of trouble and potential losses.
Additionally, replacing the company's CFO could also give it some credit with regulators. Changing names in the C-suite suggests a new philosophy and a new path forward. Regulators may be at least willing to back off a bit to see where the changes go before stepping back in.
Conversely, this could be regarded as a largely cosmetic move. The shift to handle domestic and international in separate departments is a smart play. However, whether or not the move will actually allow the company to maneuver any better remains to be seen.
For example, take one huge job done by one huge department. Then, split it into two smaller jobs with half-size departments to tackle it. The actual dynamics of the job have changed very little. The job now has half the scope, but it also only has half the resources.
As for the CFO switch, remember that this is part of the company's succession plan. They didn't bring in Xu specifically to do the job; Xu was already there. Sure, he's been seasoned as the company's deputy CFO, but the impact to regulators may not be what could be.
Wall Street's TakeTurning to Wall Street, Alibaba has a Strong Buy consensus rating. That's based on 22 Buys and two Holds assigned in the past three months. The average Alibaba price target of $210.18 implies 67.1% upside potential.
Analyst price targets range from a low of $162 per share to a high of $252 per share.
Concluding ViewsI remain bearish on Alibaba. I can understand anyone who believes this will be a help because it could be. Throw in share prices that haven't been seen since 2017, and Alibaba might be looking like a gold-plated bargain. If you're of a mind to speculate, you could do well with Alibaba.
However, too many factors are working against Alibaba for me to comfortably recommend buying in right now. Taking a wait-and-see stance here until April or so, when Xu gets in, could be a better strategy. With all the headwinds currently limiting Alibaba, there may be lower to go before Alibaba turns things around.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
According to a report published by Reuters, Alibaba Group Holding Ltd. (BABA) is planning to reorganize its domestic and international E-commerce businesses to boost growth amid a regulatory crackdown, slowing economy and increasing competition. The tech giant’s shares gained 10.4% on Monday to close at $123.60.
The company offers consumer-to-consumer, business-to-consumer, and business-to-business sales services. It also provides electronic payment services, shopping search engines and cloud computing services.
Reorganization PlansAlibaba plans to break its E-commerce business into two units — China digital commerce and international digital commerce. (See Insiders’ Hot Stocks on TipRanks)
Led by Jiang Fan, who had been in charge of Chinese retail marketplaces, the international unit will include Alibaba.com, AliExpress and Southeast Asian E-commerce business Lazada.
Further, Trudy Dai will lead the China digital commerce unit, which will include Taobao and Tmall. Earlier, Dai was overseeing several of the Chinese firm’s platforms.
The reorganization is in line with Alibaba’s aim to focus on globalization, along with domestic consumer spending and cloud computing.
Analyst CommentsCommenting on the company’s plans, Hong Kong-based Guotai Junan analyst Danny Law said, “Globalization helps Alibaba to get new traffic volume externally (and) seek new growth potential while China has been increasing supervision.”
Additionally, 86research.com analyst Xiaoyan Wang said, “The new structure for domestic E-commerce puts Dai in charge of all China retail marketplaces, including Taocaicai - its community E-commerce service, Taobao Deals as well as Lingshoutong, a retail management platform for mom and pop stores.”
“This could possibly unlock more synergies via cross-selling and integration of supply chain,” Wang added.
Wall Street’s TakeLast month, Goldman Sachs (GS) analyst Piyush Mubayi reiterated a Buy rating on the stock but reduced the price target from $252 to $215 (74% upside potential).
The analyst said, “Alibaba has been increasing its investments on both defensive-offensive strategies amid slowing retail spending and budding competition to acquire new users, build multiple traffic sources, and in the shorter term, raise merchant subsidies to retain merchants.”
Mubayi expects the company’s revenue growth to slow down to 13% in the third quarter of Fiscal Year 2022 and 16% in the fourth quarter. He also anticipates Alibaba to revise its investment portfolio and continue with the share buybacks.
Overall, the stock has a Strong Buy consensus rating based on 21 Buys and 2 Holds. The average Alibaba Group Holding price target of $212.48 implies around 72% upside potential. Shares have lost 53.2% over the past year.
Website TrafficTipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Alibaba’s performance.
According to the tool, compared to the previous year, the company’s website traffic registered a nearly 5% increase in global visits in October. Moreover, the website traffic has gone up 3.5% year-to-date against the same period last year.
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