Personal Finance

Why Alibaba Stock Slipped to Start the New Year

Alibaba (NYSE: BABA) investors have had to endure a lot over the last few years. After founder Jack Ma made insulting comments about Chinese finance ministers, the tech giant bore the brunt of Beijing’s crackdown on the tech sector, which led to a multibillion-dollar fine for Alibaba and a number of divestments to assuage Beijing’s fears of tech monopolies taking over.

Heading into 2024, some investors were hopeful that a turnaround could be afoot, but Alibaba shares were moving in the opposite direction today after Chinese economic data came in on the weak side and President Xi Jinping acknowledged the headwinds facing the company in a rare moment.

Chinese stocks fell broadly today as a result, and Alibaba finished down 3.5%, matching the decline of the Nasdaq Golden Dragon Index, showing that Alibaba’s peers were down by a similar percentage.

The Alibaba logo in a green space with grass and trees.

Image source: Alibaba.

China’s economy cools

China’s Purchasing Managers’ Index (PMI) showed factory activity declined slightly from November to December, falling to 49, its lowest level in six months. The report tamped down optimism that China’s massive manufacturing sector would start to recover in 2024.

Elsewhere, Xi Jinping commented on 2023 in a televised speech, “Some enterprises had a tough time. Some people had difficulty finding jobs and meeting basic needs.” The remarks seemed to underscore the difficulty China had in bouncing back from the pandemic.

As one of China’s biggest and best-known companies, Alibaba has been unable to escape the malaise around the Chinese economy.

Can Alibaba bounce back?

Alibaba’s recent results have shown some signs of improvement. Revenue rose 9% in its September quarter to $30.8 billion, and operating income jumped 34% to $4.6 billion as its earlier restructuring plan seems to be paying off.

Still, the company disappointed investors in November when it said it would no longer spin off its cloud unit due to the impact of U.S. chip exporting regulations.

With investors still focused on the restructuring plan, Alibaba may be less exposed to China’s weak economy than other Chinese stocks, but a recovery in the economy would still clearly benefit Alibaba as the stock hasn’t returned to its pre-pandemic growth rate yet.

Should you invest $1,000 in Alibaba Group right now?

Before you buy stock in Alibaba Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alibaba Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

See the 10 stocks

 

*Stock Advisor returns as of December 18, 2023

 

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

Why Alibaba Stock Slipped to Start the New Year was originally published by The Motley Fool

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button