Here's Why Alibaba (BABA) Stock is Declining Despite Record-Breaking Singles' Day Sales

Despite generating $14.3 billion in Singles' Day sales on Wednesday, Alibaba (BABA) shares are falling on founder Jack Ma's bearish comments on China.
By U-Jin Lee ,

NEW YORK (TheStreet) -- Despite generating $14.3 billion in Singles' Day sales on Wednesday, surpassing last year's sales of $9.3 billion, Alibaba Group (BABA) - Get Report shares are falling 1.37% to $78.76 on Thursday due to founder Jack Ma's bearish comments on China.

Specifically, Ma yesterday made cautionary comments about growth expectations in China and the impact on e-commerce giant Alibaba, according to Victor Anthony, managing director and senior Internet media analyst at Axiom Capital Management, CNBC.com reports.

President Xi Jinping's anti-corruption fight may have an impact on China in the next five to 15 months, Ma noted.

However, Ma added that Beijing's goal of 7% GDP was still possible in that time frame. 

Overall, investors did not seem to be too impressed by Alibaba's performance on Singles' Day, the world's biggest online shopping day of the year, even though sales beat analysts' estimates of $12 billion in GMV, CNBC.com said. 

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
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