Alibaba performed insanely well during its Singles Day shopping festival on November 11th bringing in RMB 92.1 billion (USD 14 billion) in sales revenue. Despite this, Alibaba’s stock price dropped from 81.43 on November 10th to 75.85 on November 15th.
Alibaba’s stock price has tumbled since November 6th
Why didn’t remarkable sales performance equate with a boost in stock price? AllChinaTech offers some quick answers.
I. Stock price reflects expectations for a company, not necessarily past performance.
The past few years have seen Alibaba experience strong growth, but the company is in need of something exciting to prove it can continue the momentum. It was reported last Friday, leading hedge fund manager, James Chanos, suggested shorting Alibaba stock and pitching long on competitor JD.com at a Morgan Stanley conference. Alibaba’s stock price subsequently dropped following the news of Chanos’ suggestions. Chanos was quoted as saying he put forward his suggestions due to “accounting concerns“ he had with Alibaba, which led to a loss in confidence in Alibaba stock. For Alibaba, success in e-commerce is nothing new, but it is proving to be increasingly harder to impress investors with sales performance in this field.
James Chanos is pessimistic about Alibaba’s growth prospects
(Photo from Aiweibang.)
II. Counterfeiters undermine Alibaba’s overall branding.
Luxury brands, including Gucci and Yves Saint Laurent, have charged Alibaba in May with providing a platform and resources to counterfeiters. American Apparel & Footwear Association also requested the United States Trade Representative to re-list Alibaba’s online marketplace Taobao on its “notorious markets” list – a list comprised of counterfeiters and intellectual property infringers. Though Jack Ma and Alibaba have publicly taken an uncompromising stance on the issue, without doubt, both the lawsuit and the “notorious” tag will have a negative influence over Alibaba’s future financial status, which is something investors don’t like to see.
Alibaba is having a hard time with luxury brands. (Photo from 365Jilin.)
III. Investors don’t trust the performance figures Alibaba touts.
Business Insider once quoted John Hempton, manager of an Australian hedge fund, as an example of investor distrust of Alibaba’s Singles Day sales numbers. Barron’s magazine has also raised doubts about Alibaba’s sales statistics, causing Alibaba to have to release a public statement to defend itself. In spite of Alibaba’s efforts to assure investors, investor distrust has held sway.
The Barron’s cover piece which questioned Alibaba’s growth
IV. Rumors of retailer sales figure fraud have brought embarrassment to Alibaba, undermining its performance from the Singles Day shopping festival.
According to Tencent Tech, Huawei and Xiaomi were both allegedly falsifying sales figures during the Singles Day shopping festival in order to appear higher on Alibaba’s top retailer list. Screenshots and an explanation of the data fraud process have been widely circulated online, triggering heated discussion on Chinese social media.
Screenshots of fraudulent purchases online
V. Analysts point out the Singles Day shopping festival hasn’t really boosted Alibaba’s GMV.
Post-event, Alibaba’s GMV has not changed substantially. Chinese new media website Huxiu posits that Alibaba’s Singles Day revenue is approximately 8.3% of total sales, slightly higher than 7.7% for 2013 and 7.3% for 2014. Consumers reserved items they wanted to purchase and waited for Singles Day to commence before proceeding with transactions. Retailers also reminded consumers of the impending sale with several recommending consumers wait for festivities to commence before purchasing. The actual revenue generated on Singles Day, regardless of the widely reported sales figures, hasn’t really contributing significantly to Alibaba’s revenue growth, appearing to be instead a mere celebration of consumerism.
This screenshot from the Tmall mobile app reads: “This item is included in the Double 11 sales, please put it in your cart or favorite it in advance.”
(Top photo from Baidu)