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Alibaba stock ends 2020 on a negative note amid regulatory heat

Alibaba stock ends 2020 on a negative note amid regulatory heat

Alibaba (NYSE: BABA) stock price remained under pressure throughout fiscal 2020 due to regulatory concerns. Donald Trump’s strategy of limiting Chinese tech companies’ exposure to the US markets have negatively impacted BABA’s stock performance early this year.

Despite the US-China trade war, Alibaba shares managed to generate some gains during the second and third quarters.

Alibaba stock performance. Finviz chart. See more stock here.

However, the largest Chinese e-commerce giant’s stock price reversed the majority of gains this month after Chinese regulators shelved the record-breaking Ant Group IPO and launched an anti-monopoly investigation into Alibaba. Ant Group counts Alibaba as a major shareholder with a 33% stake.

Alibaba shares underperformed in 2020

Alibaba stock price underperformed this year. The largest Chinese e-commerce giant shares are only up 3% in 2020 compared to the broader market rally of almost 14%. BABA shares also significantly underperformed compared to peers like (NASDAQ: JD) and Amazon (NASDAQ: AMZN).

Regulatory concerns have supported the latest share price selloff. Chinese regulators sent a notice to Alibaba-affiliate Ant regarding the supervision of the financial technology issues such as protecting consumers’ rights and interests and operating in a market-oriented way. Ant Group confirmed the notice. The regulators also initiated an anti-monopoly probe into Alibaba.  

Besides regulatory concerns, Alibaba looks sound financially. The company has generated 30% year over year revenue growth in the September quarter while adjusted EBITDA grew 28% from the year-ago period.

The company expects to generate high double-digit financial growth for the December quarter. Moreover, the consumer’s shift towards online platforms is likely to support the revenue performance of the largest Chinese e-commerce giant in 2021.  

Analysts slashed Alibaba stock price target

The market analysts are unsure of what would be the outcome of ongoing investigations and tighter regulatory policies. Baird analyst Colin Sebastian cut the BABA price target to $285 from the previous target of $325.

“The investigation will not likely result in significant changes to the company’s core business” but tightened regulations could open the door for competitors to gain market share,” Sebastian says.

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