Alibaba Stock Crash: Is This The End For BABA?!

It's over for Alibaba. Or is it? My thoughts about the extreme selloff of BABA stock. Add me on Insta: michellemarki

This week, the markets sold off Chinese stocks in freaking out over President Xi Jinping getting a third term in office. BABA fell 20% from $72 per ADR share on October 21 to as low as $58 a share on October 24 before recovering into the $60 range.

The plot is thickening for Alibaba because just when it seems darkest, there's either light at the end of the tunnel or it goes pitch black.

Who knows what will happen, but maybe we can gain a little bit of perspective and wisdom from what Charlie Munger said about China.

The fact that BABA is trading below its 2014 IPO price of $68 per share (adjusted for inflation is like $85 a share) suggests that foreign (western) investors have all but given hope on this stock. It would have to be a 5 bagger to return to its all time high stock price.

You would think with Xi cementing his power, that he would continue to do what's right for the Chinese people. Since 2021 the Chinese government has been pursuing a "common prosperity" initiative of increasing social equality, and it could take until 2035 or longer to be fully realized.

Alibaba has had to contribute to this initiative by committing $15.5B, which we might see as a "fee" but they consider it an "investment." Maybe it will be worth it someday if it means the Chinese people can spend more and live a better life.

With how Chinese real estate has crashed, we can maybe think of this as their housing bubble crashing and they have to get through this dark economic period (maybe even a recession) to emerge better later on.

China's GDP is projected to only grow at 2.7% according to Nomura. It's a big slowdown compared to their GDP growth rates averaging above 5-6% in the last decade. In comparison, the US has averaged 2-3% GDP growth rates in the last decade.

We should try to remove ourselves from immediate concerns and imagine what their economy and population will look like in 10-20 years from now. Will it be better or worse, and use more technology and cloud services or less? Even though the Chinese Communist Party appears to be ruling with a heavy hand, I would have to assume that their society will get better and will continue innovating on technology.

Some bright spots would be if they lift the Covid Zero policies and lighten up on regulatory constraints on Chinese big tech companies. But some potential problems could be if the US fights China over Taiwan, and if Chinese stocks get delisted from American exchanges.

If you own Alibaba stock, this is the kind of thing you have to be completely unemotional about and almost "set it and forget it." You might have to wake up in 5-10 years and see if it's recovered by then, if not thriving again perhaps. If you have the nerves of steel and conviction to invest in BABA at these levels, this could be the kind of opportunity that investors like Warren Buffett and Charlie Munger look for.

We should learn from what Charlie Munger said about China at the 2022 Daily Journal meeting, as they could either be his famous last words or he might be proven right in his infinite wisdom.

We have to remember that the Chinese government has a financial stake in a bunch of Chinese companies, so it's in their better interest to allow them to grow. I could see the regulatory crackdown ending sooner than later.

Maybe back in 2021, Chinese companies seemed more attractive on a valuation basis than American stocks, but now I wonder if the Daily Journal (DJCO) would rather invest in more American equities now that their stock prices have come down a lot. But so far DJCO has neither sold nor bought more BABA shares.

BABA is clearly not a stock for the faint of heart.

I look forward to making more investor friends! Please like and subscribe if you learned something or enjoyed my video. Thank you! :)

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Disclaimers: This content is for entertainment, information, education purposes only. Michelle is not a financial advisor and is not providing financial, investment, trading, tax advice, or recommendations. Please consult with a professional financial advisor with a fiduciary duty and responsibility if you need help in your situation. All trademarks, logos, and brand names belong to their respective owners.

[Krishnasaish]

Thank you Michelle! A good commentary :)

[jdp]

Good advertising for Magnolia Market in Waco Michelle!

[manuvns]

China economy has not dropped 50-70% like it’s stocks, this is a good price, a strong dollar is also not helping

[jtlye]

To be brutally honest, in short, as long as the price is not improving, even if the price is cheap and how promising the company can be in the future is just an assumption which is unattractive at all.

[davidjones]

I am 32% down on my china etf. Not selling. But to I hold or do I DCA in slowly ?!?

[fuhat]

munger loss like -400 million i think on baba . also you need into VIEs

[eruru]

Baba is not over yet for 5 or 10 years it's gonna be a good investment, all that said I'm out! This gonna be the last time I'm touching china, it's not a good place make money too much sounds and fury.

[PassportBrosBusinessClass]

As you remember, I have been skeptical about Alibaba since you started reporting about big investors buying into it.

My friend and I initially bought it back around 2015 around $85 before the run to $300+. The plummet of Baba and Chinese stocks since HFCAA has been painful for me. Same goes for the similar JUMIA.

I pretty much knew Chinese stocks were done once Evergrande started.