What happened
Shares of Alibaba Group Holding (BABA 0.31%) were getting roughed up again today as the Chinese e-commerce giant continued to face pressure from government regulators and a series of events fueled speculation that Beijing was preparing for another round of crackdowns.
As of 1:24 p.m. ET, the stock was down 5.3%.
Image source: Alibaba Group Holding.
So what
Several Chinese tech stocks have taken a hit in the past few days amid signs that the government is stepping up regulatory enforcement again. The slide began on Friday when a regulator ordered delivery giant Meituan and its peers to lower fees they charge to restaurants in some pandemic-hit areas. On Monday, rumors swirled that Tencent, the WeChat parent, was also going to be caught in Beijing's vise, and Bloomberg reported yesterday that the government called on state-run companies to reduce their exposure to Jack Ma's Ant Group, continuing a vendetta against the Alibaba founder that began over a year ago when he criticized finance ministers at a public forum.
There were no direct reports of any further regulation on Alibaba, but investors seem to have adjusted their expectations after there was some hope that the pressure would begin to alleviate this year.
Now what
Alibaba is set to report third-quarter earnings on Thursday, and the stock is likely to swing wildly. Investors are expecting profits to fall by 24% as the company has announced plans to sell off stakes in several media businesses and has made other adjustments to placate Beijing, which have cut into its historically large margins.
The analyst consensus calls for revenue to increase 16% to $38.9 billion and for earnings per share to fall from $3.35 to $2.56. Looking at its fundamentals, Alibaba stock would be trading considerably higher if it weren't a Chinese company stuck in an unpredictable regulatory web. However, the company can't escape that predicament for now, and that's why the stock is considered off-limits by much of the market.
