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Can Alibaba shares withstand Chinese crackdown?

Alibaba saw its shares rally over 7%, a day after reports stated the group was planning to offer one of its hottest apps on rival Tencent’s WeChat messaging platform.

  • Alibaba Group Holding (HKG: 9988) shares closed 5% higher on Thursday, in line with the wider bull trend
  • Its US shares (NYSE: BABA) also finished 2.81% higher a day earlier, driven by the US central bank’s upbeat growth estimates for 2021
  • The rallies are also despite the Chinese government’s latest clamp down on Alibaba’s media businesses, which is deemed as being too influential
  • To placate anti-competition concerns, the company has also decided to offer one of its faster growing services on rival Tencent’s messaging app, WeChat
  • Trade Alibaba shares with an IG account

Alibaba stock price: the latest

Alibaba Group Holding’s Hong Kong shares rallied as much as 7% on Thursday (18 March 2021), following a wider trend that saw major Asian benchmarks finishing higher.

The Chinese e-commerce group’s stock eventually closed at HK$233.60 a share, roughly 5% higher than the previous close.

Meanwhile, Alibaba’s US listing also concluded Wednesday (17 March) 2.81% higher at US$233.34 a share.

Asian stocks rose on Thursday, after US equities closed higher in light of the US central bank’s dovish stance in keeping interest rates unchanged.

On Wednesday, the US Federal Reserve reiterated its decision to maintain overnight borrowing rates at near zero through the year 2023. The Fed also improved its economic growth outlook for 2021 to 6.5%, while keeping a tolerant stance on inflation.

Authorities continue to clamp down on Alibaba

Earlier this week, Bloomberg also reported that Alibaba has plans to launch its bargain deals app Taobao Deals on rival Tencent Holdings' WeChat messaging platform, as part of its strategy to placate Chinese regulators’ ongoing crackdown on internet monopolies.

Prior to this, Alibaba and Tencent have operated an unspoken rule of not allowing their respective services to be offered on each other’s platforms and interfaces.

Last week, a total of 12 companies – including Tencent, Alibaba, Baidu, ByteDance, Meituan and JD.com – were each fined 500,000 yuan (US$77,000) by the State Administration for Market Regulation for ten internet investment deals that were found to have breached China’s anti-monopoly law.

Additionally, the Wall Street Journal reported that the Chinese anti-competition body is considering imposing a fine of over US$975 million on the e-commerce titan, which it feels is getting too influential and powerful.

Besides the fine, the Chinese government also asked Alibaba to substantially shed its media assets, with authorities reportedly increasingly worried about the company’s hold on public opinion.

Alibaba currently owns stakes in social media platform Weibo, as well as Hong Kong newspaper South China Morning Post.

Is Alibaba a ‘buy’ or ‘sell’?

In terms of outlook, the group’s US stock currently has a consensus rating of ‘buy’ from 28 analysts, according to the latest data from MarketBeat. It also has an average 12-month share price target of US$323.04, representing an upside of over 38% from the last traded price.

Last month, analysts from Citigroup, Raymond James, Mizuho, Macquarie and HSBC all boosted their price targets alongside ‘buy’ and ‘outperform’ ratings, after the company announced its December 2020 quarter earnings.

Raymond James analyst Aaron Kessler raised his firm’s target price to US$350 from US$330 while keeping a ‘strong buy’ call, citing the company’s ‘generally solid’ results.

Citigroup analyst Alicia Yap also raised price estimates to US$345 from US$316 with a ‘buy’ rating after Alibaba’s eventual December quarter results surpassed her expectations.

Alibaba’s NYSE stock is up 2.4% year to date, while its Hong Kong stock is up 2.6% so far this year.

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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