Alibaba founder Jack Ma Yun
HONG KONG -- The headwinds facing Alibaba Group Holding, China's largest e-commerce company, are getting stronger -- and the slowdown in its home market is not the only reason.
Alibaba made its debut on the New York Stock Exchange on Sept. 19 last year, raising more than $25 billion in the world's largest initial public offering. It opened at $92.70, well above its IPO price of $68, and hit $120 two months later.
Losing luster
It's a gloomier story these days. Shares in Alibaba ended Thursday at $65.96. In late August, they briefly sank to $58.
At one point, Alibaba surpassed Wal-Mart Stores to become No. 1 in the global retail industry by total market valuation. Now, however, Alibaba's market capitalization is $43.2 billion lower than Wal-Mart's, according to U.S. research company FactSet Research Systems. Alibaba also trails U.S. rival Amazon.com and Chinese online services conglomerate Tencent Holdings.
Why the change of fortunes? In early September, The Wall Street Journal reported that Alibaba lowered its projection for total sales on its online shopping sites for the July-September quarter by "mid-single-digits." Alibaba's previously projected figure remains undisclosed, but the company clearly foresees a dip in consumer spending. The three months through September were turbulent times for the Chinese economy, which saw a stock market crash and currency devaluation, and major economic gauges have confirmed the country's slowdown.
Pointed criticism
Unflattering media coverage is not helping, either.
On Sept. 12, Barron's published an article titled "Alibaba: Why It Could Fall 50% Further." According to the U.S. financial magazine, "Alibaba's shares could fall much further as China's economy struggles, competition in e-commerce increases, and the company's culture and governance draw scrutiny."
The article also said Alibaba's projected price-earnings ratio of about 25 is too far above the 15 or so for U.S. competitor eBay