The shares of Alibaba Group Holding Ltd. tumbled to its lowest level in nearly six months on Thursday after Chinese regulators launched an antitrust investigation into the e-commerce giant.
A focus of the investigation was Alibaba’s policy of “choose one of the two,” which requires Alibaba’s business partners to avoid business 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 the most likely outcome is the termination of these exclusive relationships, although it is difficult to quantify the potential impact on revenue (eg, consumers shifting their purchases to other platforms).”
Kessler echoed the strong buying rating he has had on Alibaba since at least February 2018.
Alibaba shares BABA,
fell 13.8% in morning trading and was on its way to its lowest close since July 1. Shares will experience the largest one-day drop since the IPO in September 2014, as the current record decline is 8.8% on January 29. , 2015.
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With the sell-off, the stock has entered bear market territory, which many on Wall Start are marking as a drop of 20% or more from a significant peak. The stock was currently 30.4% below the record level.
Since it closed at a record $ 317.14 on October 27, the stock closed a whopping 19.6% at $ 255.11 on December 15, before posting some losses to close at $ 256.18 on Wednesday. A close at or below $ 253.71 would make the bear market “official.”
Kessler said he believes that given the stock’s sharp drop from record highs, investors are already “largely pricing in” concerns about a study. As a result, we “remain buyers” of Alibaba’s inventory at its current level, he said.
Kessler has a price target of $ 330 on Alibaba’s stock, which is 49.5% above the current level.
The stock is down 18.2% in the past three months, as iShares MSCI China exchange-traded fund MCHI,
has gained 8.2% and the S&P 500 index SPX,
has gained 13.9%.