Alibaba (NYSE:BABA) Group Holding Limited (NYSE: BABA) shares, which rallied to a high of $313.81 on Oct. 19, 2020, have come way off the level. After bottoming at $73.28 on March 15, the stock showed some signs of a reversal.
Regulators, Economic Softness Hurt Alibaba: Ever since Alibaba's outspoken founder Jack Ma openly criticized the government and the system in place in late-2020, the company has come under increasing regulatory scrutiny.
China's crackdown on its high-and-mighty tech companies started with Alibaba in late-2020. The domestic securities regulator poured cold water on the initial public offering plans of Alibaba's affiliate company, Ant Financial. Later, regulators required Ant, a fintech company, to organize itself as a bank holding company, bringing it under increasing scrutiny and also necessitating stricter capital requirement norms.
In April 2021, Alibaba was slapped with a record $2.8 billion fine for abusing its dominant market positioning.
The regulatory crackdown then broadened to include other domestic tech companies in early 2021.
Adding fuel to the fire, the Chinese economy hit a soft patch around the time, slowing consumer spending. For Alibaba, an e-commerce retailer, consumers are front and center in its scheme of things. The predicament began to reflect in the company's fundamentals.
Related Link: Why JPMorgan (NYSE:JPM) Is Doubling Down On Alibaba, JD And Other Chinese Tech Stocks This Year
Alibaba Stock Shows Resurgence From Bottom: After consolidating around depressed levels till mid-May, the stock began to turn around. Fresh fines imposed by regulators set off renewed sell-off in the stock, although it is still holding above the psychological level of $100.
Returns From Investing At Mid-March Lows: An astute investor, who may have bet on a reversal following the mid-March low of $73.28, would be in possession of roughly 14 shares from a $1,000 investment.
Wall Street analysts are optimistic on Alibaba. Of the 23 analysts who rate Alibaba, 20 have Buy ratings, while two remain on the sidelines, according to TipRanks. The average analyst price target for the stock is $153.68.
The 14 shares would be valued at $2,151.52 if Alibaba hits the consensus price target. This would mean a gain of 115%.
Alibaba closed Friday's session down 1.27% at $102.44, according to Benzinga Pro data.
Photo: Courtesy of alibabagroup.com
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