Will Alibaba Group Holding Ltd (NYSE:BABA) Come In Trouble Today?

Alibaba Group Holding Ltd (NYSE:BABA) stunned investors after making a showstopper debut in September last year, after which the shares took flight only to land back in January. Unfortunately, the Chinese e-commerce giant now has more of headwinds than tailwinds, enough to make its journey turbulent. The company lost some interest from its investors after two incidents.

Top technical indicators for BABA.

Challenges ahead

Firstly, the regulatory crackdown on Alibaba Group Holding Ltd (NYSE:BABA) for fake goods has established the fact that Chinese companies function at the mercy of arbitrary government actions. Secondly, the bigger shock came when the company reported lower-than-expected growth in its revenues in December quarter and resultantly failed to meet analysts’ expectations. This is not the end as there is more in store as today the post-IPO lockup period will expire, which will free the sell side for 437 million shares. As the stock is still up by 24% post-IPO, hence it is an opportunity for many to exit it and book profits.

Lock-in expire

Such possibilities should keep fresh investors away for some more time, who could anticipate further fall in stock prices as existing investors may rush to sell. From fundamentals perspective, Alibaba Group Holding Ltd (NYSE:BABA) is still an expensive stock that trades 32 times higher of its 2015 earnings. Also, it is likely that the company might be subject to more trials in the future, based on its recent confrontation with the regulators. Alibaba Group Holding Ltd (NYSE:BABA) is already taking steps to curb fake goods and is tightening its policies and standards for merchants. Moreover, the company is also encouraging its merchants to open stores on its Tmall. While these steps appear right for the longer term growth of the company, they might hurt the company’s revenues in the short-term.

Such factors point that Alibaba Group Holding Ltd (NYSE:BABA) may take time to become a good bargain. The stock closed marginally higher at $84.50 during the last session.

About the Author

Cooper is a graduated from Buffalo State College in New York with a bachelor's degree in Broadcast Journalism.

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