Alibaba (NYSE: BABA), the Chinese e-commerce giant, continued to struggle in 2023 as a hoped-for recovery in the Chinese economy failed to materialize, the company continued to lose market share to PDD Holdings, and a plan to spin off its non-core businesses took a step back due to new U.S. chip export restrictions.
As a result, the stock finished the year down 12%, according to data from S&P Global Market Intelligence.
As you can see from the chart below, the stock got out to a strong start before giving up those gains and slumping over the rest of the year.
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Image source: Getty Images.
Alibaba’s Troubles Persist
Alibaba stock actually soared to start 2023; the conventional wisdom was that last year would mark a comeback in Chinese stocks as the country had recently lifted its zero-COVID policy.
Investors also seemed to bet that Beijing’s campaign against the tech sector had run its course, and Goldman Sachs also issued a note saying that better times were ahead for the Chinese tech giant.
However, the stock started to fall in anticipation of its earnings report in February and continued to slide after a brief gain as the company reported just 2% revenue growth for the December quarter. However, earnings per share increased 14% to $2.79 in that quarter as the company controlled costs and drove efficiencies.
At the end of March, the stock rebounded on a plan to break up the company into six businesses with the e-commerce division, including Tmall and Taobao, remaining wholly owned by Alibaba.
The stock gave up those gains and remained volatile through the second quarter after a jump on its March quarter earnings in May didn’t last.
Worries about export controls on U.S. chips also seemed to weigh on the stock as shares faded through most of the third quarter.
In November, the stock plunged as the company said it was ending the planned spinoff of its cloud computing business due to the U.S. export restriction rules, which the company said “created uncertainties for the prospects of Cloud Intelligence Group.” It added that the spinoff would no longer create shareholder value.
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Image source: Getty Images.
Future Prospects for Alibaba
Alibaba stock has continued to slip in 2024, and a comeback won’t be so easy. The Chinese economy remains weak, and the company is losing market share to Pinduoduo and Temu-parent PDD Holdings, which has won over consumers with a deals-focused model.
The good news is that Alibaba’s revenue growth seems to be improving, but after several years of unexpected challenges for the company, investors need to be convinced that it can deliver sustainable growth without interference from outside factors.
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