Shares of Alibaba Group Holding Ltd. suffered a historic selloff Thursday to the lowest close in nearly six months, after Chinese regulators launched an antitrust investigation into the e-commerce giant.
A focus of the investigation was Alibaba’s policy of “choose one of two,” which requires Alibaba’s business partners to avoid dealing with competitors, as the Associated Press reported.
“[W]e are not surprised by the announcement of the investigation,” wrote analyst Aaron Kessler at Raymond James, in a note to clients. “We believe the most likely outcome is the termination of these exclusive relationships, though it is difficult to quantify the potential revenue impact (e.g. consumers shifting buying to other platforms).”
Kessler reiterated the strong buy rating he’s had on Alibaba since at least February 2018.
plunged 13.3% to close at $222.00, the lowest close since July 1. That shares suffered the biggest one-day decline since going public in September 2014, breaking the previous record drop of 8.8% on Jan. 29, 2015.
The stock has also crossed over into a bear market, which many on Wall Start say is defined by a decline of 20% or more from a significant peak. Thursday’s close was 30.0% below the Oct. 27 record close of $317.74.
Kessler said that even before Thursday’s selloff, he believed the stock was already “largely pricing in” the concerns about an antitrust probe. As a result, “we remain buyers” of Alibaba’s stock at current levels, he said.
Kessler has a $330 price target on Alibaba’s stock, which is 48.6% above current levels.
The stock was now up just 4.7% year to date, erasing the bulk of the 49.5% gain it had at the record close. In comparison, the iShares MSCI China exchange-traded fund
has gained 8.0% this year, and pulled back 6.3% since closing at a record $82.81 on Nov. 6, while the S&P 500 index
has advanced 14.1% this year and was just 0.5% below its record close of 3,722.48 reached Dec. 17.