Alibaba Group Holding Ltd (BABA) had an IPO for the record books almost a year ago, with the Chinese e-commerce giant soaring out the of the gate. But BABA stock has fallen on hard times since then, slumping across 2015 and taking it on the chin again this week after disappointing quarterly results.
Alibaba posted profits that were double what it earned in the year-ago period, but mainly because of one-time charges and strength in its film operations. Revenue missed targets, too, despite being up 28% year-over-year; BABA stock saw $3.26 billion in sales, missing estimates for $3.39 billion by a wide margin.
For those who bought into the Alibaba IPO hype, the performance of the past few months has been very disappointing. And naturally, many are wondering where BABA stock will go from here.
Sadly, I think the answer is “lower.” The revenue miss was disturbing, and the e-commerce giant’s gross merchandise volume is not encouraging.
Yes, BABA is moving customers to mobile. But that’s not enough if the big sales metrics can’t keep up.
It’s also worth admitting that we don’t know much about Alibaba after about a year. BABA is a complicated mess with many divisions and subsidiaries, and its management structure is very heavy-handed. Shareholders don’t have much say or much visibility into things.
And, of course, there remain serious risks of a China slowdown. While the long-term growth potential of China is hard to argue with, it’s also hard to argue with the idea that things are rough right now in Asia. BABA stock might be forced to deal with some of that pressure in the short term — right when investors are getting pessimistic.
Sentiment is not in Alibaba’s favor right now, and investors would be wise to bide their time before bottom fishing in this e-commerce king. I have confidence that Alibaba will stick around and figure this out, but I think it’s more likely we see BABA stock plumb its initial offer price before we see a leg up from here.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.