How Alibaba is Affected: This “crackdown” is primarily focused on big tech and private tutoring companies. Alibaba has already been hit with a 2.8 billion dollar fine for abuse of its dominant market position, which, alongside general fear of investing in the Chinese tech sector felt by foreign investors, has lead to the stock price falling over 30% in 2021.
Fundamental Analysis: Alibaba can be considered a value play for the first time in its history, with an abnormally low PB ratio of 2.84 and a PE ratio of 19.521. Revenue growth year over year (YoY) is 40 .2%, 6.4% better than related companies, and net income still increased by slightly over 2% despite a slowdown in the overall Chinese economy. With a current ratio of 1.80, Alibaba can pay off any short term liabilities it may have, and with a debt to equity ratio (Debt/Eq) of 0.15 it is equipped to handle all long term debt payments. Overall, the fundamental picture is good.
Technical Analysis: There is a large megaphone pattern that has been developing since September of 2015. Due to the strong sentiment, Alibaba has a high chance of dropping 15% more to retest the lower of the megaphone. From there, it will most likely consolidate between 140 and 190 dollars until foreign investors realize how much of a discount Alibaba is trading at. My recommended entry is 138$. My first price target is the previous ATH , 300$, which I expect to be reached by April 2024. My second price target is 400$, which should be hit in March 2025. I reached these price targets by looking at past rallies, the yearly return of Alibaba (up to October 2020), and various fundamental formulas for guessing future returns.
Personal Opinion: From a fundamental perspective, Alibaba is well positioned to retain its dominant position over the Chinese ecommerce market and weather the five year regulatory storm that it faces. From a technical perspective, it will still go down in the short term, but within five years I can see gains of over 100%. Diamond hands to you all.
***I’m back from my second months long hiatus. Will be posting more ideas soon. As always, this is my personal opinion and not actual financial advice, although you can follow it nevertheless.***