With Regulatory Issues In The Rearview Mirror, Alibaba Appears Cheap At $90

Chinese e-commerce and cloud behemoth Alibaba stock has gained close to 10% over the last five trading days. There are a couple of factors driving the recent gains. Last week, China’s Central bank imposed fines totaling over $1 billion on Alibaba’s affiliate and digital payment services major Ant Group, while also noting that most of the key issues with financial platform players such as Ant had been addressed, while saying that the domestic tech industry will see “normalized supervision” going forward. This is giving investors confidence that China is winding up its nearly three-year-long crackdown on technology companies, removing a considerable overhang on big Chinese tech stocks such as Alibaba.

However, the stock has returned just about 4% on a year-to-date basis, underperforming the broader technology indices. This is likely to be due to mixed economic data from China and a weaker-than-expected post-Covid-19 reopening of the economy. Declining prices are also becoming a problem in China, as producer prices for the month of June fell at their fastest pace in more than seven years, while consumer prices also appear to be on the verge of entering deflationary territory. Investors have also been a bit concerned about the recent performance of Alibaba’s cloud segment, which saw revenues shrink by about 2% year-over-year during Q4 FY’23.