Alibaba, the Chinese e-commerce giant, has experienced significant volatility in the stock market. Despite its recent price slump, many value investors remain optimistic about Alibaba's future, seeing it as trading at a substantial discount and undervalued. However, the mere fact that a stock is undervalued doesn't guarantee a comeback. Alibaba's profitability hasn't been the issue, as the company has consistently reported strong earnings and boasts substantial cash reserves, often engaging in share buybacks.
While value investors continue to express hope, the timing and certainty of Alibaba's recovery are far from guaranteed. This uncertainty leaves many retail investors hesitant to average down on their positions, despite the enthusiastic endorsements often seen on social media.
Geopolitical tensions, particularly between the US and China, further cloud Alibaba's path to recovery. The US has taken measures to curb China's economic growth, and presidential candidates have promised tougher stances, adding to the uncertainty.
These geopolitical risks weigh heavily on institutional investors, leading them to be cautious about allocating funds to Alibaba and other Chinese ADRs. As a result, these ADRs struggle to gain momentum in the market, despite the Chinese government injecting funds into the market to support them.
From a technical perspective, Alibaba reached its all-time high of $319 in October 2020 and hit a low of $57 two years later. Currently, the stock price has been oscillating within a range since November last year, hovering between the mid-$78 and mid-$67 marks. It appears to have found temporary support at $70, a significant distance from its peak.
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