Alibaba (BABA) Stock Down, Counterfeit Lawsuit Mediation Threatened

Alibaba (BABA) stock is declining after a group of luxury brands suing the company asked to suspend mediation following comments by Alibaba founder Jack Ma.
By Amanda Gomez ,

NEW YORK (TheStreet) -- Alibaba Group Holding (BABA) - Get Report stock is falling by 1.08% to $80.48 in late morning trading on Tuesday, after a group of luxury brands suing the e-commerce company asked a judge to suspend the mediation talks related to the lawsuit that claims the company is a channel for counterfeiters, according to Reuters.

Yves Saint Laurent, Gucci and other Kering (PPRUY) brands claim mediation will be useless after Alibaba's founder Jack Ma said in a Forbes article last week he would rather lose the case than settle, Reuters reports.

Ma made the comment before the company agreed to mediate, an Alibaba spokesman told Reuters.

"It leaves the impression... that Alibaba's request for mediation was not made in good faith, but rather as a tactic to delay this case and to force plaintiffs to expend resources spinning their wheels in an expensive and time-consuming mediation," the plaintiffs' lawyer said in a letter to a U.S. District Court for the Southern District of New York judge, Reuters noted.

Judge Keven Castel is urging the each side to still hold the talks, adding that the company's public position on the matter may differ from its confidential position.

Separately, TheStreet Ratings team rates ALIBABA GROUP HLDG as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

We rate ALIBABA GROUP HLDG (BABA) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BABA has underperformed the S&P 500 Index, declining 21.44% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • ALIBABA GROUP HLDG reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($16.60 versus $1.59).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 571.9% when compared to the same quarter one year prior, rising from $514.69 million to $3,458.36 million.
  • Although BABA's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average.
  • The gross profit margin for ALIBABA GROUP HLDG is currently very high, coming in at 71.73%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 101.46% significantly outperformed against the industry average.
  • You can view the full analysis from the report here: BABA

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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