Alibaba shares could drop another 50%: Barron's
Alibaba shares could drop another 50%: Barron's

According to Barron’s, shares of Alibaba Group Holding Ltd that fell below their initial offering price after having climbed 75% in their first two months of trading are expected to lose another 50% of their value.

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.

According to Alibaba spokesman, Bob Christie, the article “contains factual inaccuracies and selective use of information, and the conclusions the reporter draws are misleading”. A letter has been posted by the company to Barron's editor in which it has complained about the story.

The company operates two big retail websites and warned about lower-than-expected transaction volumes, after having reported that volume growth in the June quarter dropped to 34% from the 50%-plus rates earlier.

Barron's said, "That may only worsen as China's economic growth drops to its lowest pace in six years".

The company is worth $160 billion, according to the recent share price, but the stock is trading at nearly 25 times the average earnings guess from analysts. Barron's said that it should be nearer the 15 times multiple of eBay Inc.

Alibaba has said in its letter that the price-earnings multiple comparison is not correct.




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