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Alibaba Shares (NYSE: BABA) End Day +1.78%, Its’ Hong Kong Listed Shares Soaring

Analyst Team trader
Updated 10 Apr 2024

Alibaba shares (NYSE:BABA) ended Tuesday in the green to the tune of 1.78%, but since US markets closed, there has been a memo released that has sent waves of excitement through the Hong Kong listed shares (9988-HK), up 5% through trading today.


Jack Ma's Re-emergence Sparks Optimism in BABA

In a surprising turn of events that has sent ripples through the global business community, Jack Ma, the enigmatic co-founder of Alibaba has re-emerged with a noteworthy internal memo addressed to employees. This marks Ma's most significant engagement within the company in five years, stirring both curiosity and optimism among investors and employees alike.

Released amidst a period of sweeping changes, the memo follows Alibaba's strategic decision last year to restructure its operations into six distinct units—a move that was seen as a pivotal step towards increasing agility and unlocking shareholder value. This restructuring had a profound impact on the firm, and now, Ma's renewed presence suggests that he may play a more influential role in shaping Alibaba's future.

The internal document sent a wave of excitement across financial markets, culminating in a 5% surge in Alibaba's Hong Kong-listed shares. This market response underscores the weight Ma's leadership still holds, despite him stepping back from the limelight in recent years.

In the memo, Ma lauded the efforts of CEO Eddie Wu and Chairman Joe Tsai. He acknowledged past missteps, indicating a humility and a readiness to learn from them, while simultaneously emphasizing the need to undertake timely corrections and execute future reforms. Ma's words come after a tumultuous period marked by his public criticism of Chinese regulators in 2020—a move that drew severe repercussions not only for him but also for the broader tech sector in China.

Earlier in the year, the Alibaba co-founder, alongside Joe Tsai, had rekindled investor confidence by acquiring hundreds of millions of dollars' worth of Alibaba shares, contributing to a notable uptick in the company's stock value. This recent purchase, coupled with his reappearance and active dialogue, is seen by many as a reaffirmation of his commitment to the company and could signal Ma's deeper involvement in steering Alibaba through an evolving business and regulatory landscape.

The financial community is abuzz with speculation whether Jack Ma's latest internal communication foreshadows a potential strategic shift for Alibaba as it navigates the complexities of global commerce and heightened scrutiny from Chinese regulators. His previous absence, marked by diminishing public appearances and reduced engagement with Alibaba, had left many pondering the direction of the company.


Earnings Looming – Pricing Strategy Tests Profits

The e-commerce giant is slated to unveil its fourth-quarter financials for the period ending March 31, 2024, in the early days of May. Alibaba’s strategic move to slash product prices on its heavyweight platforms—Taobao and Tmall—has been a calculated effort to attract and retain a broader consumer base and improve purchase conversion rates. However, this approach is a double-edged sword, potentially squeezing the company's profitability in the upcoming quarterly report.

Known for its colossal presence in the online retail space, the Chinese champion’s efforts to remain competitive with aggressive pricing could well inflate sales volumes to drive the top line. Yet, this very tactic may exert downward pressure on the bottom line, placing earnings under the spotlight.

As Alibaba ramps up its value proposition for customers, it's also seen prudently managing its share count via aggressive stock buybacks, a strategic move expected to provide some padding for its earnings per share (EPS) amidst the prospects of profitability headwinds.

Wall Street analysts watching Alibaba have been recalibrating their expectations ahead of the financials release. Citi’s Alicia Yap has reaffirmed her confidence with a Buy rating, albeit with a tempered price target of $124, down from $126. Concurrently, Alex Yao from J.P. Morgan echoes the optimistic stance with a Buy rating, advisably suggesting investors “buy on weakness,” though his price target also saw a slight adjustment to $100 from $105.

Despite a 27% slide in Alibaba's stock over the past year, lagging behind the broader equity markets, analysts remain largely bullish. With 15 Buy ratings counterbalanced by a trio of Holds, the general consensus tilts towards a Strong Buy. This is buoyed by the fact that, at an average price target of $104.66, there is a projected upside potential of over 43% from current levels.

With the voice of Jack Ma rejoining the chorus of Alibaba's leadership, there is a palpable sense of anticipation to see whether one of China's most influential business figures will sway the company's trajectory in the years to come.

The tech sector, investors, and Alibaba's global stakeholders are all watching closely as Jack Ma steps back onto the stage, potentially heralding a new chapter for the tech behemoth he helped create. Whether it will suffice to meet Wall Street’s expectations remains a focal point of discussion as the financial release looms on the horizon.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.