Alibaba (BABA) fell close to its 52-week low at around $110 on Dec. 29 only to rebound the next day. Ongoing regulatory risks will hurt this Chinese e-commerce giant’s long-term trend. Is BABA stock a buy yet?
Investors who bet the U.S. markets are expensive and Alibaba is cheap may make a bigger mistake. Alibaba is on a downtrend for a reason. Before the abrupt policy shift against e-commerce firms happened, co-founder Jack Ma criticized the Chinese Communist Party.
The CCP never forgets those who speak against it. The government fined Alibaba, accusing it of monopolistic practices. Alibaba contributed billions to the CCP’s Common Prosperity over the next few years. It must sell its Weibo stake (30%) to a state-owned Chinese media firm. In addition, Beijing reportedly halted its cloud partnership. The government said that Alibaba did not tell China’s communications regulator about the Apache Log4j2 vulnerability.
In the year ahead, the government will weaken Alibaba’s dominance. This will give competitors in the e-commerce, video, and cloud markets a chance to take market share. Investors are expecting revenue growth to slow to around 20% Y/Y. BABA stock reflects the dramatic slowdown.
The stock faces hardships ahead of new regulations. This may quickly reverse. Wait for the government to signal a neutral stance before betting that Alibaba will rebound.
