Alibaba Stock Drops Below $100: What’s Next?

It appears that the worries of Alibaba (NYSE:BABA) shareholders aren’t likely to fade anytime soon. Regulatory concerns, the macroeconomic slowdown in China, and heightened competitive activity is taking a toll on its growth, and in turn, weighing on its stock price. 

It’s worth noting that the Alibaba ADR (American Depositary Receipt) is down about 61% over the past year. Moreover, it fell below $100 on Thursday as Chinese stocks face the risk of getting delisted from U.S. exchanges if they fail to adhere to the HFCAA (Holding Foreign Companies Accountable Act). 

Recently, the U.S. SEC (Securities and Exchange Commission) issued a provisional list of companies that have failed to comply with the HFCAA. The list includes BeiGene (NASDAQ:BGNE), Yum China (NYSE:YUMC), Zai Lab (NASDAQ:ZLAB), ACM Research (NASDAQ:ACMR), and HUTCHMED (NASDAQ:HCM). 

Along with Alibaba, shares of several other Chinese companies closed lower. For instance, shares of JD.com (NASDAQ:JD) and Nio (NYSE:NIO) declined by 15.8% and 11.9%, respectively. 

What’s Next?

While Alibaba faces the risk of delisting, its recent financial performance was reassuring. Though its top line took a hit from macro headwinds and increased competitive activity, its active consumer base continued to grow. Alibaba stated that it added 43 million active consumers in Q3, which is encouraging.

Further, international growth opportunities and continued investment to support its global cloud infrastructure and logistics network development provide a solid growth foundation for the long term. 

Citing strong value in its e-commerce and cloud businesses and long-term growth opportunities, Robert W. Baird analyst Colin Sebastian reiterated his Buy recommendation on BABA stock. However, due to the near-term challenges, Sebastian lowered his price target to $160 (72.2% upside potential) from $180. 

Meanwhile, most Wall Street analysts are bullish about BABA stock. It has a Strong Buy consensus rating on TipRanks based on 21 Buy and 2 Hold recommendations.

Further, due to the considerable decline in its stock price, Alibaba’s price forecast shows solid upside potential. The average Alibaba price target of $178.53 implies 92.1% upside potential to current levels.

Conclusion

Given the multiple headwinds, Alibaba stock appears to be a risky investment. However, the significant correction in its stock price has led to a compression in valuation, making it attractive at current price levels. 

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