Alibaba has taken investors on a wild ride in 2021.
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After hitting a yearly low earlier this month, Alibaba stock is now on track to hit a new rock bottom before 2021 is done.
The embattled Chinese technology giant entered this year with a stock price nearing $230—a level it would eclipse, hitting an all-time high just shy of $310 in October—but that didn’t last long. Alibaba ‘s (ticker: BABA) U.S.-listed shares have had a brutal 12 months, falling some 50% and plumbing depths not seen since spring 2017.
The bottom for the year came on Dec. 3, when Alibaba stock closed at $111.96. Since then, the shares have performed marginally better, often trading above $120—until a week ago. After ending Dec. 21 at $122.98, the stock has been steadily declining, and marked its second-worst close of the year Tuesday at $114.80. Alibaba stock was on track to record a new yearly low Wednesday, down more than 3% to below $111.20.
There is a long list of reasons why the stock has done so badly.
To start, the company, like much of the rest of the Chinese technology sector, has found itself squarely on the wrong side of regulators as President Xi Jinping tightened his grip on the country’s economy.
More recently, U.S.-listed Chinese companies have grappled with regulatory uncertainties on both sides of the Pacific over their listings in New York, which provide easy access to U.S. capital and comfortable stock market valuations.
For Alibaba, there is also a bearish business case at play. In its latest quarterly earnings, the company slashed its outlook for the fiscal year, revealing slowing growth and pinched margins.
The stock market decline Wednesday s could be blamed on both regulatory pressures and growth opportunities. Alibaba is in deal talks with a state-owned group over potentially selling its 30% stake in Weibo, a Chinese social-media platform similar to Twitter (TWTR), Bloomberg reported Wednesday, citing anonymous sources.
The last two weeks have seen some analysts sour even further on Alibaba stock. Since Dec.16, 23 analysts whose estimates are recorded in FactSet data have reissued target prices for the shares. Of those, 17 cut their target price.
There remain reasons to be bullish on Alibaba—unpredictable regulatory worries aside. After all, it remains one of the most dominant technology companies in the world’s second-largest economy, and some analysts view its new businesses as materially undervalued.
Based on FactSet data, Alibaba stock has an average rating of Buy among brokers and a target price of $199.85—implying some 80% upside from Wednesday’s levels.
Write to Jack Denton at email@example.com