NEW YORK (TheStreet) -- Alibaba (BABA) - Get Alibaba Group Holding Ltd. Report stock is lower by 1.74% to $80.24 in pre-market trading Friday after China stocks notched their greatest daily decline since August amid regulatory probes into major Chinese brokerages.
Based in Hangzhou, China, Alibaba is principally engaged in online and mobile commerce through products, services and technology.
The Shanghai Composite Index closed down 5.48% to 3,436.30 today, negating most of Shanghai's gains from this month and bringing the index down 38% since its peak in June, the Wall Street Journal reports.
A probe into three Chinese brokerages sparked the decline, prompting speculation about whether officials' push to end seemingly suspicious and volatile trading practices could be doing more harm than good, the Journal adds.
The government is attempting to hold companies accountable for the selloff earlier this year, but today's drop in the market might indicate that Chinese markets are not as stable as officials believe, according to Bloomberg.
"Investors have concerns about who will be the next [brokerage]" targeted by authorities Wong Chi-man, head of research at China Galaxy International Securities, told the Journal. "With limited information, investors are finding it difficult to quantify the impact, therefore some investors may just trim their position and stay on the sidelines."
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 few notable weaknesses, 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 28.45%, 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 ($16.77 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.