Company’s often find it difficult to produce quality goods and services while maintaining profit. Alibaba Group Holding Ltd (NYSE:BABA) has recently found this going to be true. Well this is at least according to analyst at Swiss-based financial services company Credit Suisse. According to Credit Suisse, Alibaba’s recent effort to tackle irregularities plaguing its B2C e-commerce, TMall platform, is costing the company. The company’s recent crackdown on cheating and poor quality has resulted in Credit Suisse reducing its buy price target for Alibaba to $112.
The policy to regulate its operations that became effective on March 9 comes on the heels of the negative publicity gained in recent weeks. Earlier this month revelations about fake orders on C2C Taobao platform, as well as being suspended the suspension of its online Lottery Sale by China, rocked the company.
Based on Alibaba’s inability to sell online lottery tickets, analysts at Credit Suisse has predicted impact of up to 1.5% impact on mobile gross merchandize for this financial year. Consequently, the analysts have revisited the company’s potential earnings for the next two years. Earnings have been revised by 7.1% for 2016 and 3.7% for 2017.
Alibaba Group Holding Ltd (NYSE:BABA) has reported Gross Merchandize Volume at 1.68 trillion yuan for the financial year ended March 2014. Additionally, it is reported that the unscrupulous activity associated, with fake orders was about 0.6% of the 1.68 trillion. This is a significant sum and the company is correct in taking steps to regulate its activities.
Adding to Alibaba’s woes is the fact that the company’s shares have lost close to 17% this year. At the close of last week Alibaba’s shares price fell to $84.40. Alibaba’s attempt to combat these negative impacts has been to make available a portion of its locked-up shares. This will amount to 17% of shares outstanding.