• Alibaba stock drops to near $125.50 in premarket.
  • BABA stock down 4.6% in premarket.
  • Biden administration says it wants to ensure that US user data not compromised.

Alibaba (BABA) shares slumped in Tuesday's premarket after Reuters released a story saying that the Biden administration is probing the ecommerce giant's cloud business. Shares dropped by 4.6% to $125.50 at the time of writing.

Alibaba Stock News: a dark cloud

The Reuters report says that the Biden administration began the probe shortly after the current president took office. 

"The focus of the probe is on how the company stores U.S. clients' data, including personal information and intellectual property, and whether the Chinese government could gain access to it." the article says. Although the cloud business is one of the most talked about features of Alibaba's portfolio of companies, the unit does about $50 million worth of sales in the US – making it tiny in comparison to Amazon Web Services or Microsoft's Azure.

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 must hold $123

BABA shares have dropped to the mid-$120s on the news. It is imperative if Alibaba stock is going to continue its recent momentum that shares remain elevated abot $123. This is near where BABA shares closed on December 21 and 30. Additionally, this price coincides with 21-day moving average, which sits just above.

If BABA breaks $123, then support exists at $118 and around $110. On the upside, BABA needs to first break the 9-day moving average before setting its sights on the January high of $138.63.

BABA 1-day chart

 

The author owns shares in Alibaba.


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