Alibaba Group Holding Ltd.’s shares fell Thursday to the lowest close in nearly six months after Chinese regulators launched an antitrust investigation into the e-commerce giant.
The focus of the investigation was Alibaba’s “choose one of two” policy, which requires Alibaba’s business partners to avoid negotiating with competitors, as the Associated Press reported.
“[W]We are not surprised by the announcement of the investigation, ”Raymond James analyst Aaron Kessler wrote in a note to clients. “We believe that the most likely outcome will be the termination of these exclusive relationships, although it is difficult to quantify the potential impact on revenue (for example, consumers shifting their purchase to other platforms).”
Kessler reiterated the strong purchase rating he has had on Alibaba since at least February 2018.
Alibaba shares BABA,
it fell 13.8% in the morning trading session and was headed for the lowest closing since July 1st. The shares are expected to suffer the biggest drop in one day since going public in September 2014, as the current record drop is 8.8% on January 29. , 2015.
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With the liquidation, the stock crossed the territory of the bear market, which many on Wall Start point to as a 20% drop or more from a significant peak. The stock was 30.4% below its record close.
Since closing at a record high of $ 317.14 on October 27, the stock closed down 19.6% to $ 255.11 on December 15, before reducing some losses to close Wednesday at $ 256, 18. A close of $ 253.71 or less would make the bear market “official”.
Kessler said he believes that, given the sharp fall in stocks since their record, investors are already “largely appreciating” concerns about an investigation. As a result, we “remain buyers” of Alibaba’s shares at current levels, he said.
Kessler has a price target of $ 330 for Alibaba’s shares, which is 49.5% above current levels.
Shares fell 18.2% in the past three months, while the iShares MSCI China MCHI exchange-traded fund,
gained 8.2% and the S&P 500 SPX index,
gained 13.9%.