Analysts remain committed to the Chinese e-commerce giant, though
The shares of Alibaba Group Holding Ltd (NYSE:BABA) are down nearly 4% to trade at $156.04 today, and earlier fell to an annual low of $155.80, after founder Jack Ma announced he will step down from his chairman position on Sept. 10, 2019. The company's current CEO Daniel Zhang will succeed him, while Ma will remain on the board until 2020.
Today's losses have Alibaba stock headed toward its worst day since June 25, but it's already been a summer to forget for the Chinese e-commerce concern. In the past three months, BABA has shed nearly 24%, guided lower by its descending 30-day moving average. A host of reasons are behind BABA's sudden heel turn from its June 5 record high of $211.70, including fraught trade relations between the U.S. and China, as well as weak earnings from Shenzhen-based tech giant Tencent.
Analysts remain undeterred. In response to the succession plan, Jefferies reiterated its "buy" rating and $225 price target, noting the 12-month time frame will enable a smooth transition. This optimism is shared in the analyst community, too, with all 18 of the brokerages covering BABA rating it a "buy" or "strong buy."
Short sellers have been heading for the hills, though. After topping out at a record high 141.5 million shares in the Aug. 1 reporting period, short interest fell nearly 22% to 104.8 million shares. While this is the lowest level since August 2016, these bearish bets still represents nearly 9% of BABA's total available float. BABA's inability to capitalize on this flurry of short covering could point to underlying weakness.
Elsewhere, skepticism has been ramping up in the options pits. Specifically, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows BABA with a 10-day put/call volume ratio of 0.67. While this still shows call buying has topped put buying on an absolute basis, the reading's annual percentile rank of 99% indicates this level of interest in put buying relative to call buying is quite unusual.