Alibaba Group Holding Ltd. has seen its stock plummet by nearly 80% from its 2020 high, causing its valuation to hit an all-time low and its market capitalization to match that of rival PDD Holdings Inc. Options traders are showing increased bearishness ahead of Alibaba’s upcoming earnings report, with a put contract betting the stock will drop by 14% by the end of April being the most traded on Monday in Hong Kong. Alibaba’s revenue for the past three months is expected to have increased by 5.6%, marking the slowest growth in three quarters.
The online retail market in China is becoming more crowded, with competition from rivals such as Douyin Mall, run by TikTok owner ByteDance Ltd., and Pinduoduo. Persistent deflationary pressure and declining wages have driven a price war that is favoring discount retailers, resulting in demand for cheaper products. The stock is currently trading at 8 times forward earnings, near its lowest valuation ever, making Alibaba one of the cheapest technology stocks in China.
Alibaba has been focusing on share buybacks, and says it has around $12 billion remaining for repurchases through 2025. Options traders remain pessimistic, with an increase in put options trading. The company’s new management is leading revamp efforts by scaling down non-core business and stepping up investment in global expansion and artificial intelligence. However, analysts predict that Alibaba’s core business growth will likely remain lackluster in the next four quarters.
