During China’s lunar New Year celebration, the government paused regulatory crackdown. For two weeks after that, the country hosted the Olympics. After those events, China resumed its tough policies against Alibaba.
The government asked firms to disclose their exposure to Ali Pay. Regulators may want to assess the impact of weakening Alibaba’s fintech unit further. It may also support fintech rivals to encourage competition. Alternatively, China may want to assess Ali Pay’s competition with its domestic cryptocurrency.
Last week BABA stock fell to a multi-year low of $100.02. The earnings report did not help. Alibaba’s revenue grew at levels not seen since 2014. The e-commerce giant is a bargain stock. Buyers will bet on the stock bottoming as shares find new lows.
China need only end its crackdown against Alibaba and technology firms. When that happens, BABA stock could double or more.
Trouble Ahead
Alibaba will focus on growing users, improving service, and increasing product choices. It faces an uphill battle. The government already accepted billions in donations for the government’s common prosperity initiative.
It may ask for more. Revenue growth may slow further. At 0-10% revenue growth, the stock is not attractive. Investors may consider holding MercadoLibre (MELI), an Argentinian firm or Amazon.com (AMZN) instead.
The tougher market conditions will pressure Alibaba’s margins.
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