Chinese e-commerce giant Alibaba (BABA) has announced the sale of its stake in Sun Art to private equity firm DCP Capital. The company is getting $1.58 billion for its 78.7% stake in the hypermarket chain, which is below the $3.6 billion BABA paid for it in 2020.
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Alibaba’s investment in Sun Art didn’t play out as it hoped, with the company’s push into the brick-and-mortar retail sector fizzling out. Investors are unlikely to be surprised by this as the e-commerce company has started shifting focus back to its main business lately.
Shareholders will note that Alibaba’s retreat from physical retail makes sense as the Chinese economy struggles to recover from recent troubles. That includes ongoing issues with inflation that are weighing on consumers. Chinese President Xi Jinping addressed these problems in a press conference, marking a rare instance of the country’s government acknowledging economic difficulties.
What This Means for BABA Stock
While Alibaba stock is down from its 52-week high of $117.52 per share, its performance over the last year is still strong with a 15.85% increase. Attempts to create a leaner company through its brick-and-mortar exit could bolster the stock next year. However, shares are unlikely to return to their all-time high of $317.14, which was reached at the height of the COVID-19 pandemic. That saw many turn to e-commerce for everyday needs as lockdowns prevented travel.
Is BABA Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Alibaba is Strong Buy based on 14 Buy and one Hold ratings over the last three months. With that comes an average price target of $127.05, a high of $146, and a low of $105. This represents a potential 49.84% upside for BABA shares.
