Why Investors Hated Alibaba Group Last Week, and Love the Company This Week
Investors are a fickle bunch.
Last week, the news about Alibaba was doom and gloom. China is slowing, Alibaba’s stock was overpriced, and the company’s shady corporate structure were all risks. All of these fears destroyed 33 percent of the stock’s value from the top it achieved last November, and the chart since then looks like a ski slope.
The popular press, of course, piled on. Columns about how risky Alibaba was just drove the negativity further, and the stock price lower.
Then everything changed. To quote a CNN headline, Alibaba got a new CEO and reported awesome earnings, helping the share price jump over 10 percent in a day.
The stock is still down a lot since its peak, but that isn’t stopping analysts and journalists from falling in love with the stock all over again. Analysts are now saying how great the company looks, and encouraging more people to buy the company, just a week after dogging the company as an awful underperformer.
Wall Street is fickle.
But what exactly is going on here? What’s driving the change in attitude?
The company reported revenues that grew 45 percent on a year-over-year basis and a 40 percent increase in gross merchandise volume. But the real impressive number is the increase in active buyers on Alibaba’s many sites: this rose 77 percent on a year-over-year basis. In other words, a lot more people are using Alibaba, and more growth is likely to come.
This is why people now love the company: it’s still exploding in size, even after growing to become one of the biggest companies in the world. So expect more love from Wall Street—until, of course, the mood changes. As it always does.