How Low Will Alibaba’s Dip Drop?

For as high as Alibaba’s stock has soared and (more recently) as precipitously as it has dropped, some theorize that its journey in the latter direction is far from over.

A new story from Barron’s postulates an additional 50 percent decline in Alibaba’s stock price, citing economic struggles in China, increased eCommerce competition and scrutiny of the company’s culture and operations.

According to Barron’s, the rise in popularity of Alibaba rivals like JD.com are cutting into the market share of Alibaba’s retail platform Tmall, as well as its merchant site Taobao. Additionally, the outlet attests, Alibaba’s offerings outside the realm of online shopping — such as video hosting site Youku Tudou and the company’s movie production arm — are operating in the red.

In light of those circumstances, the Barron’s story finds Anne Stevenson-Yang, founder of Chinese research firm JCapital Research, questioning the validity of Alibaba’s claims of a 55 percent growth rate for the past three years and yearly revenue increases averaging 56 percent.

“Alibaba’s financial reports have broken free of verifiable reality,” Stevenson-Yang is quoted as saying, “and have reached an escape velocity that doesn’t comport with Chinese government figures of overall retail sales, consumer spending or online commerce.”

Alibaba Vice President of International Media Robert Christie denied to Barron’s that the company’s figures (such as its assertion to have 367 million users and that the average shopper spends 26 percent more on Alibaba sites than the average U.S. shopper spends on all sites) are inflated. Instead, he attributes the numbers to factors like rapid adoption of smartphones for use in eCommerce and Alibaba’s expanding user base.

The Barron’s story further attests that complaints regarding Alibaba’s handling of the issue of counterfeit goods being sold on its sites could also threaten the immediate future of its market value. It points out that, last January, the State Administration for Industry and Commerce in China released a whitepaper alleging Alibaba’s failure to adequately address the sale of counterfeit goods and other alleged illegal activities in its home country’s marketplaces; the company denied the accusations in the whitepaper — which, Barron’s notes, was retracted just days after its release.

In response to Barron’s inquiry on that particular matter, an Alibaba representative told the outlet, “We are committed to the protection of intellectual property rights to eradicate counterfeit merchandise that may appear on our marketplaces.”

The Barron’s story goes on to discuss at length a number of other potential factors that contribute to the outlet’s prediction of Alibaba’s steep decline in stock value, including the company’s alleged sub-optimal treatment of its shareholders, a potential conflict of interest relating Alibaba CEO Jack Ma’s additional role as a general partner of its third-party investment fund and skepticism about the company’s stated average annual spend per user.

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