In America, Cyber Monday is quickly becoming as much of a tradition of the early holiday shopping season as Black Friday. In China, they’ve already had their Cyber Monday thanks to Alibaba Group Holding Ltd (NYSE:BABA).
The Amazon.com, Inc. (NASDAQ:AMZN) of China has held something called Singles’ Day every November since 2009. Like Cyber Monday, it’s the biggest online shopping day of the year, except all of it funnels through just one online marketplace.
As usual, BABA made a killing, as retailers who peddle their merchandise on its platforms pulled in a record $17.8 billion in total sales, with an incredible 175,000 orders per second. For perspective, Black Friday and Cyber Monday combined did just $5.8 billion in online sales last year.
Singles’ Day Failed to Spark Alibaba Stock
Despite the impressive Singles’ Day haul, Alibaba stock has barely budged in the week since. BABA actually dipped to a three-month low ($89) in the first trading after Singles’ Day, though it has since recovered those losses. Still, BABA stock is well off its September highs ($109) and is down more than 10% in the last month-plus.
So what’s the problem? For one, Singles’ Day growth has slowed considerably. This year’s 32% sales increase paled in comparison to last year’s 60% jump, and CEO Jack Ma warned of even slower growth in the coming years.
The other “problem” is that the $17.8 billion record fell shy of some analysts’ forecasts that this year’s Singles’ Day might top the $20 billion mark. That seems crazy, but it speaks to the Apple Inc. (NASDAQ:AAPL)-like expectations Alibaba stock is saddled with these days. It’s a byproduct of success, of course, but having a high — at times unrealistic — bar to clear can also be a burden, especially when it comes to BABA stock.
Prior to its Singles’ Day “disappointment,” Alibaba was under scrutiny for its accounting practices, which played a big role in the drop-off in BABA stock.
Federal regulators have questioned Alibaba’s massive sales reports, which aren’t audited, don’t include products returned and don’t meet traditional accounting standards. The Securities and Exchange Commission is currently investigating BABA’s revenue reports. Any headline that includes the words “SEC investigation” is bad for business.
But SEC investigations are fairly commonplace for companies of Alibaba’s size and financial might. Apple CEO Tim Cook got in trouble with the SEC after sending a private email to CNBC’s Jim Cramer last year. Exxon Mobil Corporation (NYSE:XOM) is currently under investigation for its accounting practices. Amazon is under SEC investigation for unknown reasons.
You get the point. It happens, especially to the big boys. And while SEC investigations and accounting practices being questioned make for bad headlines that can occasionally drag down the stock, they’re typically forgotten in a month or two.
The other factor dragging down Alibaba stock over the last month was Donald Trump’s election. The president-elect’s harsh words about trade with China are viewed as a potential drag on sales at BABA, which derives a big part of its business from trade with the U.S. For example, Apple and Nike Inc (NYSE:NKE) were among the top sellers with Chinese consumers on Singles’ Day.
Look for BABA to Bounce Back
But like the SEC investigation, Trump is a possible headwind for BABA stock. Until the feds say otherwise, the company is growing sales at a 46% clip. And although profits were well down in each of the last two quarters, analysts expect the company to return to earnings-per-share growth in 2017.
Yes, Singles’ Day was technically a disappointment for Alibaba, at least to some. But it’s not what’s weighing down BABA stock right now. The SEC and Donald Trump are. A month from now, those may be largely forgotten on Wall Street. Soon enough, Alibaba stock will get back on track.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
