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Alibaba Breathes a Sigh of Relief, Chipotle Sizzles as Markets Fizzle

By Dan Caplinger - Apr 12, 2021 at 12:13PM

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These two stocks are bucking a Wall Street downtrend.

Stock market benchmarks pushed into record territory last week, so it was only natural that they might take a pause to begin the new week on Monday. Even with modest losses for major averages, market participants remain largely upbeat on the prospects for continued economic recovery and the potential for things to get back to normal. Just before 11:30 a.m. EDT, the Dow Jones Industrial Average (^DJI 1.05%) was down 72 points to 33,729. The S&P 500 (^GSPC 1.05%) had lost 7 points to 4,122, and the Nasdaq Composite (^IXIC 0.00%) had given up 69 points to 13,832.

Yet there were some stocks that managed to defy the downturn and move higher. One of the largest was Alibaba Group (BABA 2.04%), which climbed despite getting what might seem like bad news. Meanwhile, Chipotle Mexican Grill (CMG -0.04%) got a vote of confidence on Wall Street, and the high-growth Mexican food chain could see further gains if things go as many bullish investors expect.

Alibaba's fine is just fine with shareholders

Shares of Alibaba Group were up more than 8% Monday morning. The Chinese internet giant got hit by a big fine, but many shareholders had expected potentially much harsher consequences for some recent incidents.

Internet connections as light on a dark globe.

Image source: Getty Images.

Over the weekend, antitrust regulators in China hit Alibaba with fines totaling about $2.8 billion. The move from regulators came after Alibaba CEO Jack Ma argued that the Chinese government was getting in the way of technology companies and other businesses trying to be innovators in key growth industries. The fine was bigger than any previously imposed by Chinese officials on antitrust grounds.

However, investors seemed to breathe a sigh of relief following the move. Alibaba accepted the fine and said all the right things, promising to take steps to make it easier for users to choose between marketplace platforms and other services. Moreover, despite the size of the fine, it's relatively small compared to Alibaba's hundreds of billions of dollars in annual sales.

Alibaba had already made headlines earlier this month when venerable investor Charlie Munger's company announced that it had made Alibaba stock its third-largest holding. That has some value investors thinking that tech might be a place to look for bargains, and it could lift Alibaba further if the trend catches on.

Chipotle looks spicy

Elsewhere, Chipotle Mexican Grill shares were up about 2%. The Mexican food chain got favorable comments from analysts at Raymond James, who see good things ahead for the company.

Raymond James boosted its rating on Chipotle from market perform to outperform, setting a price target of $1,800 per share. The analysts have seen a big ramp-up in sales in the restaurant space, and Chipotle appears to be taking full advantage of the uptick in interest. As a result, Raymond James believes that Chipotle will fare much better than expected when it announces its first-quarter results next week.

The news follows numerous efforts from the restaurant chain to bolster its long-term prospects. Chipotle recently invested in autonomous delivery specialist Nuro, and it even gave a nod to the cryptocurrency craze with its "chiptocurrency" promotional giveaway.

Chipotle's stock has already nearly doubled in the past year, and the new price target implies further gains of 15%. Yet if earnings rebound as much as most anticipate, it could keep the stock climbing well into the future.

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Stocks Mentioned

Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,306.80 (-0.04%) $0.46
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
BABA
$116.00 (2.04%) $2.32
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,097.26 (1.05%) $321.83
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,825.33 (1.05%) $39.95
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,028.74 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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