Alibaba stock price tumbled in Hong Kong on Monday, reaching its lowest level since September 24. BABA’s Hong Kong shares have now plunged by 14.50% from its highest point this year as geopolitical fears remained. Here are the top reasons it will rebound soon.
Alibaba Group has a limited exposure to the US
The main reason why the Alibaba stock price is tumbling today is the ongoing geopolitical tensions between the United States and China.
China and the US have restarted their trade war ahead of the upcoming meeting between Donald Trump and Xi Jinping at the APEC meeting later this month.
China has threatened to limit exports of key materials like rare earths, while the United States has warned that it will impose tariffs, which will bring the effective rate to 140%. As with the past, China warned that it will retaliate against the US measures.
There are two potential catalysts for Alibaba stock price in this angle. First, there are odds that the two sides will de-escalate, especially ahead of the upcoming Trump and Xi meeting.
Second, Alibaba has a limited exposure to the United States. Instead, the company makes most of its money from China and the emerging markets.
While the company does not share its numbers by geography, analysts estimate that its total US revenue is less than $4 billion. Alibaba made over $137 billion in revenues in 2024, meaning that it can offset its US revenues.
READ MORE: Here’s why JPMorgan, Morningstar are bullish on Alibaba stock
BABA’s business is thriving
Meanwhile, the most recent results showed that Alibaba’s business is thriving across the board.
Its cloud business has received a boost from the ongoing investments in the artificial intelligence industry.
The most recent results showed that the revenue from its cloud business rose by 26% in the last quarter to over $4.6 billion, with the company citing its AI solutions. Within this segment, the company’s AI-related revenue experienced triple-digit sales growth for the eighth consecutive quarters.
Alibaba is benefiting as many companies in China embrace its data infrastructure to train their AI models.
The other core businesses also did well in the recent quarter. Its Alibaba International Digital Commerce Group made $4.8 billion, up by 19% YoY, while its domestic division rose by 10% to $12.49 billion.
The only laggards in Alibaba’s business is its others segment, which includes products like DingTalk, Quark, Youku, and Alibaba Health, whose revenue fell by 28%. This decline was because it sold off Sun Art and Intime last year. Also, its ele.me business is struggling because of the soaring competition from the likes of JD and Meituan.
READ MORE: Here’s why the Alibaba stock price has gone parabolic
The other potential catalyst for the Alibaba stock price is that its innovation is set to make it a major player in the semiconductor industry, which China is trying to boost. It is working on chips that may one day rival those made by Nvidia.
The company’s valuation is also cheaper than other firms. It has a forward PE ratio of 23, which is reasonable for a company seeing strong revenue growth across most of its segments. Its PEG ratio of 0.15 is also lower than the sector median of 0.77.
Alibaba stock price technical analysis
The daily timeframe chart shows that the Hang Seng Index has pulled back in the past few months, moving from a high of H$185 to the current $160.
It remains above the 50-day Exponential Moving Average (EMA) and the important support level at H$142, its highest swing in March this year.
The stock has formed a doji candle, which is a common bullish reversal sign. Therefore, the most likely scenario is where the Alibaba stack price resumes the uptrend as investors target the YTD high of H$185 followed by the psychological level at H$200.
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