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BABA stock forecast: Chinese government reshuffle spooks investors

By Nicole Willing

Edited by Valerie Medleva


Updated

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BABA
Alibaba
76.25 USD
0.85 +1.130%
HK50
Hong Kong 50
17533.0 USD
94.5 +0.540%

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The Alibaba logo on an office block
BABA stock forecast: Can Alibaba rebound after China’s lockdowns? – Photo: testing / Shutterstock.com

The Alibaba (BABA) share price has struggled so far in 2022, falling by 44.7% year-to-date (YTD). 

Chinese e-commerce and technology sectors are facing fresh challenges: The Nasdaq Golden Dragon index, which tracks US-listed shares in Chinese companies, shed a record 14% following announcements that Xi Jinping has extended his rule to a third term as president – and filled senior government roles with party loyalists. In the 24 hours following the announcement, Alibaba fell 18%.

The Hang Seng Index also fared dismally, dropping 1,030 points to a 13-year low, following investor concern that the new government would stifle the economy and private enterprise. With China’s zero-Covid policy now cemented in the near term, along with government support for Vladimir Putin, a bearish sentiment might continue for tech stocks as investors stick to a risk-off mode.

The strict zero-Covid controls implemented by the Chinese government have resulted in lockdowns which have disturbed supply chains and the manufacturing industry. 

In an article for CNBC, Antonella Teodoro, senior consultant at MDS Transmodal, said: “China’s zero-Covid approach is impacting production and manufacturers are seeking alternatives to the current ‘factory of the world’.

“Drilling down to the individual commodity groups exported from China, we observe that China has been continuing to lose market share, with Vietnam amongst the countries gaining importance on the international landscape.”

In March, the BABA share price fell below $100 for the first time since 2017. It has since been unable to hold above that level. But the stock had gained value since late May after the company announced its first-quarter earnings report.

The June-quarter earnings report was more positive: Daniel Zhang, chairman and CEO of Alibaba Group, said: “Following a relatively slow April and May, we saw signs of recovery across our businesses in June. We are confident in our growth opportunities in the long term given our high-quality consumer base and the resilience of our diversified business model catering to different demands of our customers.”

Toby Xu, chief financial officer of Alibaba Group, also commented: “Despite the challenges posed by the COVID-19 resurgence, we delivered stable revenue performance year-over-year. We have narrowed losses in key strategic businesses given ongoing improvements in operating efficiency and increasing focus on cost optimisation .

“We recently shared our plan to add Hong Kong as another primary listing venue. By becoming primary listed on both Hong Kong and New York stock exchanges, we aim to further expand and diversify our investor base.”

Is the current share price at a good entry point for investors looking to make an Alibaba stock investment? Has the share price bottomed out or is there potential for it to retreat again?

In this article, we look at Alibaba’s recent performance and some analysts’ Alibaba stock price predictions for the direction of the share price in the future.

Alibaba faces challenging business environment

Historical stock price data shows that BABA dropped by 49% in 2021, ending the year at $118.79 a share, as worries about the Chinese market and a sell-off in technology stocks in the US exerted further downward pressure.

In April last year, the Chinese government fined the company $2.8bn for what the State Administration for Market Regulation said was monopolistic behaviour. 

A five-year chart of Alibaba's stock performance

The record fine was lower than the market had anticipated and removed some of the uncertainty surrounding the potential penalty that would be imposed. However, a gain in the share price was short-lived and it continued the downward trend that started in October 2020, after hitting its all-time highest stock price of $309.92.

Alibaba announced its December quarter 2021 results on the same day that Russian tanks rolled into Ukraine (24 February 2022), leading to much market upheaval, particularly in the technology sector.

What may also have concerned investors was that its revenue figures represented its slowest quarterly growth rate since going public in 2014. Revenues totalled RMB242.58bn ($38.07bn) in the October-December period, an increase of 10% year-over-year (YoY).

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The Alibaba share value dropped to $76.76 on 15 March 2022, its lowest level since 2016. The price then jumped to $104.98 the following day, as the Chinese government said it would support the stock market and economy, and provide a more favourable regulatory environment.

On 22 March, Alibaba announced it was scaling up the size of its Alibaba share market repurchase programme to $25bn from $15bn. By 18 March, the company had bought up a total of 56.2 million American Depositary Shares (ADRs), equivalent to $9.2bn, under the programme.

Continued volatility

It would continue to show volatility in the following months, and on 7 June reached its highest level since the dip in March at $125. However, it trended downward again after that, last closing at $93.10 on 29 July.

On 26 May, Alibaba had announced its quarterly earnings for January to March, offering mixed results. It reported better-than-expected customer management revenue (CMR) revenue and cost optimisation but failed to meet its expected core commerce margin.

The company’s revenue increased by 9% from the first quarter of 2021 to RMB204.05bn, which it said was primarily driven by an 8% increase in revenue from the China commerce segment. Alibaba reached approximately 1.31 billion annual active customers for the 12 months ended 31 March, up by 28.3 million from 31 December, as the company reached the one billion milestone in China.

Alibaba reported a net loss of RMB18.36bn for the quarter, “primarily due to decreases in the market prices of our equity investments in publicly-traded companies”.

The company declined to give financial guidance because of the continued uncertainty surrounding the pandemic, noting that “since mid-March 2022, our domestic businesses have been significantly affected by the Covid-19 resurgence in China, particularly in Shanghai”.

The share price responded to the results by rallying more than 14% on 26 May to $94.48 but has traded consistently below $100. As of 25 October, BABA shares are trading hands at $61.56. Is Alibaba stock a buy, sell or hold following the reopening of Shanghai from lockdown at the start of June? 

Below, we look at some of the most recent BABA stock analyses to give an indication of how the stock could trade in 2022 and beyond. 

Alibaba stock forecast for 2022 and beyond

As of 25 October, the average price target from 21 Wall Street analysts who have issued a BABA stock price target is $162.24 in one year, according to data compiled by Market Beat. The estimates ranged from $110.00 at the low end to a high of $250.00. There were 19 buy ratings and two hold ratings.

Analysts at Jeffries maintained their “buy” rating: “Our price target of $218 is based on SOTP valuation. Key risks include: (1) severe macroeconomic slowdown impacts online shopping growth; (2) aggressive marketing spending in local services and globalisation due to intensified competition; and
(3) user growth falls below expectations.”

In their October report, analysts at Morning Star noted that Alibaba has a fair value estimate of $179.00:

“We think the probability of year-over-year adjusted EBITA increase at wide-moat Alibaba – a reverse from year-over-year adjusted EBITA decline since the June quarter of 2021 – is high in the coming September and December quarters. We believe registering positive year-over-year adjusted EBITA growth, together with continuous cost rationalisation, should help investors to gain more confidence over Alibaba’s ability to register profit growth in the longer term. This should be a positive catalyst for the share price. However, we think year-over-year decline in the customer management revenue and gross merchandise volume in Taobao and Tmall amid weak consumer sentiment and competition is another concern for investors about Alibaba’s resilience.”

As of 25 October, the long-term forecast for the stock from Wallet Investor was bearish and raised questions about the future of Alibaba’s US listing. The website’s algorithm-based analysis projected that the BABA share price could fall to $2.54 by the end of 2022. 

However, Coin Price Forecast projected the price could recover, although it would take 12 years to return to the previous all-time high above $300. The price could reach $82.16 by the end of 2022 and $117.03 by the end of 2023. The site makes an Alibaba stock forecast for 2025 of $164.54 by the end of the year, and $250.05 by the end of 2030. By the end of 2034, the stock could trade at $303.39, putting it on track for further gains by 2040. 

It’s important to keep in mind that stock markets remain extremely volatile, making it difficult to accurately make an alibaba share price forecast for the following few hours, and even harder to give long-term estimates. As such, analysts and algorithm-based forecasters can and do get their predictions wrong.

If you are considering investing in stocks, we recommend that you always do your own research. Look at the latest Alibaba stock news, market trends, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.

FAQs

Is Alibaba a good stock to buy?

Whether BABA is a suitable investment for your portfolio depends on your personal circumstances and risk tolerance, among other factors. You should do your own research into the company’s performance and evaluate the level of risk you are prepared to accept before investing. And never invest money that you can’t afford to lose.

Will Alibaba stock go up or down?

At the time of writing (25 October), some Wall Street analysts expected the BABA share price to rise over the coming year, according to data compiled by Market Beat. However, over the longer term, online forecasting site Wallet Investor was bearish on the outlook for the stock. 

Forecasters can and do get their predictions wrong. You should do your own research to make informed trading decisions. Bear in mind that past performance is no guarantee of future returns.

Why has the Alibaba share price been dropping?

The BABA share price has come under pressure this year from renewed lockdowns in China weighing on demand, uncertainty created by Russia’s invasion of Ukraine and bearish sentiment on technology stocks.

Will Alibaba shares recover?

The direction of the Alibaba share price will probably depend on a number of factors, including the growth of Chinese consumer sales as well as government policy on technology stocks. A continued crackdown on large Chinese tech firms could continue to weigh on the stock, while policy clarity could ease downward pressure on the stock.

Should I invest in Alibaba stock?

This depends entirely on your attitude to risk and risk tolerance. Some forecasters seem optimistic, while online forecasting site Wallet Investor was bearish on the outlook for the stock. 

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