Alibaba Group Holding Ltd: Can BABA Stock Survive This Storm?

Alibaba stockBABA Stock Likely to Take a Breather  

Alibaba Group Holding Ltd (NYSE:BABA) stock has been beaten on negative sentiment as the Office of the United States Trade Representative (USTR) put its e-commerce platform “Taobao” on its “notorious markets” list. Alibaba stock is currently trading at around the $87.00 level, compared to the $100.00-plus level in October. The general feeling is that the company is not doing enough to stop sales of counterfeit  products.

In the quarterly results announced by the company last month, Alibaba surprised all by posting revenue and earnings that beat analyst expectations. The company said that it could better monetize the growing user base, and for the September period, it reported close to 440 million annual active buyers, up 14% from a year ago.

BABA stock gained on this surprise news. However, Alibaba stock has been under pressure since then on a string of negative news.

Evercore ISI  Institutional Equities, however, is bullish on the Chinese e-commerce giant, the reason being Alibaba’s 440 million active buyers and the majority share of the company in the very attractive China e-commerce sector. Evercore is positive about the steps that Alibaba has taken to clean its site of problematic sellers and listings, which have been the concerns of the USTR. On the counterfeit goods issue, the company claims to have removed over 380 million listings and closed over 180,000 online stores for selling fake goods. (Source: “Amazon, Alibaba: Two Top Internet Picks,” Barron’s, December 28, 2016.)

Alibaba also launched “TaoProtect,” which is an English-version online complaint reporting platform that has over 1,100 brand partnerships on its “Good-Faith Takedown” program, which allows merchants  with a good track record of complaints to request immediate removal of pirated products. Evercore has a “buy rating for BABA stock, based on the growing opportunities for the company in the areas of branded engagements, entertainment, and cloud computing.

But it is not clear from Evercore’s thesis as to how a Trump administration would impact the company’s ambitions in the U.S. market. President-elect Donald Trump has been known for his stand against China’s trade policies, and for his plans to introduce tariffs to protect American business interests. This has the potential to turn into a major trade war with China, and Alibaba stock may not be able to recover from this blow.

Alibaba management also expressed its disappointment with the USTR’s decision in its official statement and questioned whether the USTR acted based on actual facts or was influenced by the current political climate. As the Trump administration gets into full swing from January, it is wait-and-watch for Alibaba stock.