Alibaba Stock Forecast: BABA mirrors Hong Kong, drops below $120 in premarket
- Alibaba stock dropped 6% on Friday, January 21.
- The Chinese government criticized Chinese big tech for its treatment of gig workers.
- BABA may drop to support at $110.
It was only last week that beaten down Chinese stocks were rallying on a stimulus announcement and news of the government cutting interest rates. This morning, however, Alibaba (BABA) shares are careening down more than 4% in the US premarket after its Hong Kong-listed sibling plunged 6.3% this morning. The stock is being affected by continued disdain from Chinese government leadership, this week's scheduled Federal Reserve meeting and a surge in new Hong Kong COVID-19 cases.
Alibaba Stock News: investors run for the exits
Last week four government agencies criticized Alibaba and other Chinese mega cap tech companies for how they treat gig workers. This led to some warriness about BABA shares since government enmity has been the greatest cause of it losing 60% of its market cap in the past 14 months.
This week the US Federal Reserve will meet on Tuesday and Wednesday, and my growth investors are worried that the announcement of a possible interest rate hike may be announced. The forecasting of interest rate hikes has already caused growth and tech stocks to tumble in the past month, so there is worry an actual official rate hike make cause another sell-off.
Last but not least, Hong Kong announced 130 new COVID-19 cases on Sunday. This would mean nothing in the rest of the world, but in lockdown China this is the most new cases in a single day in 18 months.
BABA key statistics
| Market Cap | $360 billion |
| Price/Earnings | 18 |
| Price/Sales | 3 |
| Price/Book | 2 |
| Enterprise Value | $289 billion |
| Operating Margin | 13% |
| Profit Margin |
15% |
| 52-week high | $274.29 |
| 52-week low | $108.70 |
| Short Interest | 2% |
| Average Wall Street Rating and Price Target | Buy, $207.42 |
Alibaba Stock Forecast: BABA breaking through $120 is cause for concern
FXStreet wrote last week that BABA shares must hold $123 in order to keep from entering a downtrend. Last Friday's 6% drop stopped at $123.23, but today's premarket price below $118.50 portends a fall back to support around $110.
Though some support exists at $118, the heavy price decline on Friday and again in Monday's premarket spells disaster for bulls hoping to once again surmount resistance at $138.63.
BABA 1-day chart
The author owns shares in Alibaba.
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Author
Clay Webster
FXStreet
Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.
