Alibaba stock price keeps getting cheaper: is it a buy?

on Jul 27, 2021
  • Alibaba stock price crashed on Tuesday.
  • The decline happened after China added more regulations on the tech sector.
  • We explain whether the stock is a buy or sell.

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The Alibaba (NYSE: BABA) stock price crashed to the lowest level since May 2020 after China intensified its crackdown against technology companies. The stock declined by more than 10% in Hong Kong and by more than 4% in premarket trading. It has fallen by more than 40% from its highest point this year, bringing its total market cap to more than $519 billion.

Alibaba crashes

China has been in a relentless battle recent. In the past few months, the company has decimated the country’s expansive Bitcoin mining industry. The strong pressure has pushed more miners to other countries that are more receptive.

The country has also targeted technology, which is the fastest-growing segment of the economy. Last month, it ordered companies like Google and Apple to remove apps like DiDi from their app stores. The regulators also barred DiDi from onboarding new customers pending investigations.

The crackdown on tech firms intensified this week after the country ordered Meituan and similar companies to ensure that their riders were paid as employees. This is a tough thing considering that Meituan has thousands of drivers and riders.

Another crackdown happened in the lucrative for-profit education sector. The regulator ordered companies operating in the sector not to make profits and to avoid going public or receive investments from foreigners. As a result, stocks like TAL Education and New Oriental crashed by more than 20% on Monday.

Alibaba stock price has declined as foreign investors dump their shares following the crackdown. Recently, the company has been forced to share data with competitors and reduce anti-competitive practices. It has also been forced to change the business model of Ant Financial, a company that it owns a 30% stake in. 

So, while Alibaba is cheaper than Amazon, there are concerns about the impact of the tech crackdown on its business. Indeed, analysts are torn about the future of the BABA stock price. Those at DZ downgraded their forecast to $192 while those at UBS, KeyCorp, and Needham expect it to jump to more than $300.

Alibaba stock price forecast

Alibaba stock price
Alibaba stock price chart

The daily chart shows that the BABA stock price has been in a freefall recently. Along the way, the shares declined below the black ascending trendline that connected the lowest levels since January this year. It has also moved below the 50-day and 200-week moving averages, which is a sign that bears are in control. Therefore, the shares will likely continue falling as bears target the next key level at $150.