Here's Why Alibaba (BABA) Stock Is Lower Today

Alibaba (BABA) shares are declining as Chinese regulators decide to tighten their belts on checking the quality of products purchased online.
By U-Jin Lee ,

NEW YORK (TheStreet) -- Alibaba Group Holding (BABA) - Get Report  shares are declining 0.46% to $77.94 on Tuesday as Chinese regulators decide to tighten their belts on checking the quality of products purchased online. 

The inspections will be random, according to the State Administration for Industry and Commerce (SAIC), Reuters reports.

In the past, e-commerce companies like Alibaba and rival JD.com (JD) have been under scrutiny for allegedly selling counterfeit goods on its various marketplaces, Venturebeat.com noted.

In particular, Alibaba has been a target of these criticisms, however, the company said that it's taking initiatives to combat the concerns. 

If the SAIC finds that merchants are selling goods that do not meet the regulator's standards, all sales will be halted, Reuters added. 

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 some concerns, 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's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 33.37%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. 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 ($16.76 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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