Alibaba stock (NYSE:BABA) has had another tough month, declining by about 11% since mid-September (about 21 trading days) compared to the S&P 500 which remains roughly flat over the same period. Although Chinese President Xi Jinping recently indicated, at the recently held Communist Party congress, that the government would be supportive of the country’s technology sector, which has been at the receiving end of a regulatory crackdown, there are a host of other issues that have weighed on Alibaba stock. Firstly, the U.S. has imposed new regulations regarding the sale of semiconductor technology to China and this has weighed on the broader Chinese tech space. Now Alibaba isn’t really a direct player in the semiconductor space, but Internet companies are dependent on U.S. semiconductor tech to support their cloud services and platforms. Moreover, there are also concerns about the Chinese economy amid issues in the over leveraged property sector, which was a big driver of growth in recent years. The Chinese government has delayed the release of key economic indicators and this could be a sign that things remain tough, translating into a tough outlook for e-commerce players such as Alibaba.
However, now that BABA stock has seen a decline of about 11% over the last month, will it continue its downward trajectory in the near term, or is a recovery imminent? Going by historical performance, there is a roughly 52% chance of a rise in BABA stock over the next month. Out of 272 instances in the last eight years that BABA stock saw a twenty-one-day decline of 11% or more, 141 of them resulted in the stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 141 out of 272, or about a 52% chance of a rise in BABA stock over the coming month, implying that the stock may not be a great bet for the near term. See our analysis of Alibaba Chance of Rise for more details.
Calculation of ‘Event Probability’ and ‘Chance of Rise’ using the last eight years’ data
- After moving -1.2% or more over five days, the stock rose in the next five days on 52% of the occasions.
- After moving -11% or more over ten days, the stock rose in the next ten days on 54% of the occasions.
- After moving -21% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 52% of the occasions.
|S&P 500 Return||5%||-21%||68%|
|Trefis Multi-Strategy Portfolio||1%||-25%||196%|
 Month-to-date and year-to-date as of 10/22/2022
 Cumulative total returns since the end of 2016