Why Alibaba Stock Was Sliding Today
What happened
Shares of Alibaba Group (NYSE: BABA) were pulling back today as more weak economic data came out of China. As the Chinese tech giant tries to rebuild momentum in areas like e-commerce and cloud computing, the company has proven to be sensitive to the state of the Chinese economy.
As of 1:38 p.m. ET, the stock was down 4.9% on the news.
So what
This morning, China reported another decline in imports and exports, showing the world's No. 2 economy continues to be challenged even months after it ended its zero-COVID policy.
Exports in the country fell 8.8%, while imports were down 7.3%. Exports to Southeast Asia, a key market for Alibaba, which owns the Southeast Asian e-commerce business Lazada, fell 13.3%.
Alibaba's results have been closely tied to the Chinese economy in recent quarters as the tech giant is also struggling to rebound from a long period of sluggish growth due to a crackdown on tech companies by Beijing, the zero-COVID policy, the weak economy, and sluggish consumer demand.
Investors seemed to believe that Alibaba stock won't bounce back until the Chinese economy does.
Now what
The company delivered better-than-expected results in its most recent quarter, showing some signs of a recovery. Revenue rose 14%, its fastest growth rate in several quarters, and the company also showed solid margin improvement with adjusted operating income up 43%.
Investors also cheered the company's reorganization into six major business groups led by the Taobao and Tmall Group, which could lead to spinoffs, potentially creating value for investors.
Despite those efforts, the stock seems likely to be range-bound until investors have more confidence that the Chinese economy can return to steady growth.
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Jeremy Bowman has positions in Alibaba Group. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
