Despite a very impressive quarterly report, Alibaba (NASDAQ:BABA) shares are in free-fall. The stock started at over $190 at the beginning of May but traded recently at $150. Markets also wonder why the Chinese firm needed to raise $20 billion on the Hong Kong markets on May 28.
Alibaba needs the $20 billion to fuel its ambitious growth. Cloud computing is fast-growing but needs more R&D spend to continue supporting the infrastructure. Still, the timing of the raise is unfortunate due to the falling share price. With the company willing to sell shares despite a ~30% drop from the 52-week high, Alibaba may be signaling that it is bearish on its stock.
Strong First Quarter
Alibaba reported a 51% boost in revenue from last year, with cloud computing revenue growing 76% Y/Y. Robust revenue growth at its China commerce retail business drove much of the increase. Consolidating its newly acquired business also helped lift results.
Adjusted EBITA margin from Core Commerce was 35% but fell for Cloud Computing and Digital Media and Entertainment.
In addition to panic selling, markets may anticipate retail demand falling in China due to the U.S.-China tariff war. Yet markets fail to anticipate China launching a stimulus package to offset the slowing exports. Doing so will help minimize the slowdown in Alibaba’s business and would put an end to the stock dropping.
