Slacking Alibaba Stock Suffers Another Round of Bear Notes

However, short-term speculators are more call-heavy than usual toward BABA

Managing Editor
Oct 10, 2018 at 9:40 AM
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Chinese internet stock Alibaba Group Holding Ltd (NYSE:BABA) is taking a hit in early trading, after suffering no fewer than three price-target cuts from analysts. Most notably, both Morgan Stanley and Raymond James cut their respective price targets to $220 and $260, with the latter citing online sales and near-term due to negative macro forces playing out in China. Elsewhere, Barclays dropped its own price target to $210. In response, BABA is down 2.9%, at $142.68.

Alibaba stock has been struggling on the charts this year, specifically seeing significant losses after a June 25 bear gap, and founder Jack Ma's exit from his position as chairman. In fact, last night the stock closed at a more than one-year low, and at last check has shed roughly 15% year-to-date. Also pushing the shares lower has been the 30-day moving average, a trendline that has been a ceiling of resistance for the stock since its aforementioned bear gap.

Despite its long-term underperformance, overall analyst sentiment remained optimistic coming into today. Specifically, all 18 covering firms sport "buy" or "strong buy" recommendations, and BABA's average 12-month price target of $227.05 comes in at a whopping 55% upside to current levels.

Echoing this optimism is the Schaeffer's put/call open interest ratio (SOIR) of 0.61, which ranks in the 20th percentile of its 12-month range. This indicates that short-term speculators are more call-heavy than usual toward the stock.

Lastly, short interest on the security has fallen 2.8% during the past two reporting periods, and now represents a healthy 11.5% of the stock's total available float. In other words, at Alibaba stocks' average pace of daily trading, it would take shorts less than four days to cover their bearish bets.

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