What happened

Alibaba (BABA 0.79%) has been underperforming since late 2020 when the IPO of Ant Group, its financial arm, was blocked after founder Jack Ma made disrespectful comments to Chinese financial officials.

Even as shares of the tech giant fell more than 70% from their peak, the stock continued to lag the market through the first half of 2023 as growth remained slow due to macroeconomic headwinds in China even as it ended its zero-COVID policy. A decision to break the company up into six different stand-alone entities also gave the stock a boost, but it wasn't enough to put the stock in positive territory.

As a result, the stock finished the first half of 2023 down 5%, according to data from S&P Global Market Intelligence, significantly lagging the S&P 500's gain of 15.9%.

As you can see from the chart, the stock got out to an early rally on signs that the tech crackdown was over, but those gains quickly faded. 

^SPX Chart

^SPX data by YCharts

So what

Alibaba stock got out to a hot start in early January on signs of detente with Xi Jinping's government after a campaign to restrain the market power of tech giants like Alibaba and Tencent seemed to have come to an end. An upgrade to conviction buy at Goldman Sachs also helped push the stock higher, as analyst Ronald Keung said he believed the worst for Alibaba was behind it.

Those gains faded, however, heading into Alibaba's December quarter report, which came out toward the end of February. The company edged out estimates on the top and bottom lines, posting a revenue increase of 2% to $35.9 billion, and adjusted earnings per share rose 14% to $2.79. After a brief pop on the news, the stock continued to decline.

After a lull in March, the stock surged at the end of that month after it announced a plan to break up into six different businesses, with its core e-commerce business, including Taobao and Tmall, remaining wholly owned.

Those gains once again didn't last, and the stock again fell on its earnings report in May, as revenue again rose 2% to $30.3 billion and adjusted earnings per share rose 35% to $1.56.

Now what

In July, Alibaba stock moved higher on reports that Ant Group would be fined about $1 billion, ending a long investigation into the company and potentially opening it up to explore an IPO.

While the breakup seems like a good way to create shareholder value, the Chinese stock is likely to be stuck in neutral until the company can find a way to reaccelerate revenue growth. For now, that remains elusive, though analysts expect an improvement in the second half of the year.