Investors who have owned stocks in the past year have generally experienced some solid gains. In fact, the SPDR S&P 500 ETF Trust (NYSE:SPY) total return over the last 12 months is 22%. But there is no question some big-name stocks performed better than others along the way.
Alibaba’s Difficult Road: One company that has been a disappointing investment in the last year has been Chinese e-commerce and cloud services giant Alibaba Group Holding Ltd - ADR (NYSE:BABA).
Fortunately for Alibaba investors, the COVID-19 pandemic actually boosted demand for Alibaba’s e-commerce, cloud services and various other online businesses and services.
Unfortunately for Alibaba investors, the company's underlying business and share price have been bombarded by crackdowns from both U.S. and Chinese regulators throughout the past year.
At the beginning of 2020, Alibaba shares were trading at around $217. By the beginning of March, the stock was down to $208.59 as China had already gotten slammed by the coronavirus pandemic.
Alibaba ultimately bottomed at $169.95 during the pandemic-driven March sell-off in the U.S. market. Fortunately for Alibaba investors, the dip did not last long.
By mid-April, Alibaba shares were back above $200 and by July they were back at all-time highs above $230. Alibaba ultimately made it as high as $319.32 in late October.
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Regulatory Crackdown: Unfortunately, while the rest of the market was making new highs in late 2020 and early 2021, Alibaba took a huge hit from Chinese and U.S. regulators.
First, Alibaba shares were slammed by a crackdown from the Chinese Communist Party after Alibaba co-founder Jack Ma criticized regulators for having a “pawn shop mentality” when it comes to banking.
Chinese regulators subsequently suspended the IPO of Alibaba affiliate Ant Group and initiated an antitrust crackdown on all Chinese big tech companies. Alibaba was ultimately fined $2.8 billion in April for violating China’s antitrust regulations. Alibaba was hit by another round of 22 fines in July 2021 by Chinese regulators cracking down on irregularities related to past merger deals.
At the same time, Alibaba has faced regulatory uncertainty in the U.S. In December, the SEC finalized rules to implement the Holding Foreign Companies Accountable Act (HFCAA), which could potentially delist Chinese stocks from trading in the U.S. within a matter of years if they fail to meet strict accounting standards and prove they are not controlled by a foreign government.
Alibaba In 2022, Beyond: The announcement sent Alibaba shares tumbling to multi-year lows below $120. After dropping as low as $108.70 in December 2021, Alibaba shares are now trading at $121.43.
Thanks to Chinese and U.S. regulators, Alibaba investors who bought one year ago and held on have generated a horrible return on their investment. In fact, $1,000 in Alibaba stock bought on Feb. 2, 2021, would be worth about $481 today.
Looking ahead, analysts are expecting much better returns from Alibaba in the next 12 months. The average price target among the 50 analysts covering the stock is $183.66, suggesting 51.2% upside from current levels.
Photo: Courtesy Alibaba
