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Alibaba shares could fall another 50%, says Barron's newspaper

Monday, September 14, 2015 - 07:16
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Alibaba Group Holding's finance arm plans to invest about 1.2 billion yuan (S$265 million) for control of a China insurance unit of Cathay Financial Holding, according to a person familiar with the matter.

[NEW YORK] Shares of Alibaba Group Holding Ltd, which recently slipped below their initial offering price after having rocketed 75 per cent in their first two months of trading, could lose another 50 per cent of their value, Barron's said in the cover story of its Sept 14 issue.

The reasons the weekly financial newspaper gave for the dour outlook: China's struggling economy, increasing competition in e-commerce and more scrutiny of the company's culture and governance.

The company runs two big retail websites and recently warned of lower-than-expected transaction volumes, after having reported that volume growth in the June quarter declined to 34 per cent from the 50 per cent-plus rates of the past. "That may only worsen as China's economic growth drops to its lowest pace in six years," Barron's said.

The recent share price puts a market value on the company of US$160 billion. But the stock is trading at about 25 times the average earnings estimate from analysts and Barron's said it should be closer to the 15 times multiple of eBay Inc.

REUTERS