Why Alibaba Stock Just Hit a 52-Week Low
What happened
Alibaba Group Holding (NYSE: BABA) investors had a rough month in February, as their shares fell 16% in response to a disappointing earnings report and fears of tightened regulation of tech companies in China. Things are getting even worse for Alibaba today, with shares of the tech giant down another 8.7% as of 10:40 a.m. ET -- more than half the losses suffered in the entire month of February, in a single day in March.
Today's losses just pushed Alibaba stock down to a new 52-week low.
Image source: Getty Images.
So what
What's ailing Alibaba this morning? There's no obvious answer -- no analyst downgrades, no negative press releases from the company itself. However, Alibaba rival JD.com (NASDAQ: JD), just reported another quarterly loss (for the fourth quarter) and the company's "weakest revenue growth in six quarters," as Reuters just pointed out.
Slowing consumer spending appears to be the reason for JD's slowdown, and if that's the case, this would be an economy-wide trend, the effects of which won't be limited to JD.com. It would confirm investor fears about Alibaba's own quarterly results last month, which (as Reuters also pointed out) showed Alibaba posting "its slowest revenue growth for the same period since going public in 2014."
Now what
The news gets worse. Last week, Chinese Premier Li Keqiang announced that the Chinese government is targeting gross domestic product growth of only 5.5% in 2022. Barron's notes that this is the "lowest GDP growth target [that China has set] in 30 years" -- and that even 5.5% may be an "ambitious" number China won't be able to hit.
CNBC points out that that in order to hit its target, China's central government is planning to grow government spending by 14.3% this year. Yet even with all that extra spending, the economy's growth rate will slow significantly from the 8.1% rate achieved in 2021.
If Alibaba disappointed investors in last year's economy, one shudders to think what might happen in 2022's.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends JD.com. The Motley Fool has a disclosure policy.
