Alibaba Stock Struggles in 2023 Alibaba Stock Struggles in 2023 as Recovery Hopes Dashed

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By Ronald Tech

Alibaba, the Chinese e-commerce titan, has faced a bumpy ride in 2023. The anticipated recovery in the Chinese economy failed to materialize, leading to a loss of market share to PDD Holdings, and a setback in its plan to spin off non-core businesses in light of new U.S. chip export restrictions. Consequently, the stock concluded the year down 12%, according to S&P Global Market Intelligence.

Chart data depicted below illustrates the stock’s initial strong performance followed by a slump throughout the year.

Image source: Getty Images.

Alibaba Struggles Persist

Although Alibaba stock initially surged at the start of 2023, the company’s trajectory reversed as investors had high expectations for a rebound in Chinese stocks following the relaxation of the country’s zero-COVID policy. Furthermore, positive sentiments emerged due to the perceived conclusion of Beijing’s regulatory campaign against the tech sector, coupled with optimistic remarks from Goldman Sachs predicting brighter times ahead for the Chinese tech giant.

However, the stock tumbled in anticipation of its February earnings report, continuing its decline after the company reported a mere 2% revenue growth for the December quarter. Notably, earnings per share rose 14% to $2.79 during the same period due to the company’s cost management and operational efficiencies.

Subsequently, the stock briefly rebounded in March on announcing plans to restructure into six distinct businesses. However, these gains were short-lived, and volatility persisted through the second quarter, following a lackluster performance after the May revenue announcement.

Concerns surrounding U.S. export controls on chips seemed to weigh heavily on the stock, leading to a prolonged descent through most of the third quarter.

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November saw a significant decline in the stock price when the company declared the termination of its cloud computing business spinoff due to U.S. export restriction rules. This decision was attributed to the uncertainties posed by these regulations on the prospects of Cloud Intelligence Group. Alibaba further stated that the spinoff would no longer create value for shareholders.

Alibaba’s stock continued its downtrend in 2024, signaling an arduous path ahead. With the ongoing weakness in the Chinese economy and the erosion of market share to PDD Holdings, the company faces an uphill battle. While Alibaba’s revenue growth demonstrates signs of improvement, investors are seeking assurances of sustainable growth in the face of unremitting external pressures.

Before making any investment in Alibaba Group, it is crucial to consider the current market dynamics and the company’s ability to weather external disruptions.

*Stock Advisor returns as of January 8, 2024

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.