Alibaba's Stock Dropped 5% To June 2020 Low After Quarterly Earning Report

Alibaba Stock Is Down By 5% After The Release Of Quarterly Report

Shares of Alibaba ended at $205.46 after the company released its quarterly report. Alibaba reported revenue of $28.6 billion, an increase of 64% on a year-over-year basis.

It should be noted that the first quarter of 2020 was very weak for Alibaba due to the negative impact of the pandemic, but the year-over-year growth is still impressive. The company expects to grow its revenue by about 30% in the fiscal year 2022.

Alibaba’s loss from operations totaled $1.17 billion due to the $2.78 billion anti-monopoly fine which has previously served as a bearish catalyst for Alibaba shares.

All in all, it was a decent report, although Alibaba missed analyst estimates on earnings. However, the stock found itself under significant pressure, and it looks that the market remains focused on Alibaba’s problems in China, where the government has started to limit power of big tech companies.

What’s Next For Alibaba?

Analysts expect that Alibaba will report earnings of $11.13 per share in the next year so the stock is trading at about 19 forward P/E. While this valuation looks rather cheap for the current market environment, it remains to be seen whether traders will be ready to buy more shares of Alibaba without an additional discount for the company’s problems in China which have put pressure on the stock since November 2020.

At this point, it looks that the market does not believe that the huge anti-monopoly fine marked the end of Alibaba’s problems, and expects stronger regulation from China’s authorities which may hurt growth and profits in the future.

At the same time, the stock has declined to valuation levels which may attract speculative traders. I’d note that Alibaba shares will likely ignore the direction of other tech giants in the near term as the company’s shares are moving on internal catalysts.