Is Alibaba stock a buy or sell after crashing by 50% in 2021?

By:
on Jan 1, 2022
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  • The Alibaba stock price crashed by 50% in 2021.
  • Regulatory and delisting concerns hurt investors’ sentiments.
  • The stock could rebound in 2022 if sentiment improves.

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The Alibaba (NYSE: BABA) stock price collapsed by almost 50% in 2021 as sentiment over Chinese equities dropped. The drop brought its total market capitalization to about $303 billion. 

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Why BABA stock crashed

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There are two main reasons why the Alibaba stock price has crashed in the past two years. First, the Chinese government has moved to disrupt the technology sector. For example, the company was forced to scrap its Ant Financial IPO. 

Once valued at almost $300 billion, Ant was recently valued at about $120 billion by Bernstein. And there is a possibility that the IPO will not happen any time soon considering that the company is in the midst of restructuring.

In addition, Alibaba and other Chinese tech companies were ordered to share data and reduce anticompetitive behavior. In April 2021, the company was also ordered to pay a record $2.8 billion for this behavior. 

Second, the Alibaba stock price collapsed because of the rising geopolitical tensions between the United States and China. The tensions are so high such that there is a possibility that the company will be ordered to delist from New York. Already, DiDi, the giant ride-hailing company has said that it will shift its listing to Hong Kong.

Still, Alibaba is a good company that is significantly undervalued. While it has warned that its revenue growth is slowing, the company is doing well. For example, its revenue rose to $126 billion in the trailing twelve months. That was a higher number than the 2020 revenue of $109 billion.

Alibaba is also more profitable than Amazon, a company that is valued at more than $1.5 trillion. For example, in the past 12 months, its profit was about $19 billion, Without the fine, the company made more than $20 billion. In the same period, Amazon’s profit was about $26 billion.

Alibaba stock price forecast

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The weekly chart shows that the Alibaba stock price has been in a deep bearish trend in the past few months. Along the way, the stock has moved below the 25-week and 50-week moving averages. It has also moved to the 78.65 Fibonacci retracement level. The stock’s Relative Strength Index (RSI) has also declined to the oversold level.

Therefore, the Alibaba stock price is a cautious buy in 2022. The company’s fundamentals are great and there is a likelihood that investors will by the dips. The biggest concern is if the stock is delisted in New York.

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