Alibaba’s market value has evaporated significantly, so investors no longer love it?

According to foreign media reports, after Alibaba Group raised a record $25 billion in its initial public offering last year, founder Jack Ma said that Alibaba Group faces the risk of over-expectations. Now it seems that what Ma said may be correct.

Since Mr. Ma’s comments in November, Alibaba Group has lost about $70 billion in market value as investors worry that its growth may slow. Alibaba’s dominance in China’s e-commerce market is eroding as the country’s economic growth is expected to slow to its slowest pace since 1990 and as consumers’ shift to mobile shopping hurts the company’s advertising revenue.

Alibaba Group's strategy to expand overseas has not yet gained much traction - the company's presence in the United States and most European markets is still negligible. As a result, Alibaba Group's revenue growth for the last quarter, to be released on Thursday, is expected to be lower than the average of the past seven quarters. Cao Lei, director of the China E-Commerce Research Center, said, "As China's economy gradually slows down and the market in big cities becomes saturated, Alibaba Group's overseas expansion seems to be becoming more and more important."

Russia and Brazil

Jack Ma hopes to replicate the success of Alibaba Group in the Chinese market to the whole world. To this end, he has set a goal of making Alibaba Group's overseas revenue account for half of the company's revenue by serving more than 10 million overseas small businesses. Although Alibaba Group has entered the Russian and Brazilian markets, Jack Ma said on his Twitter account in March this year that the company's current revenue from overseas markets still accounts for less than 5% of the company's total revenue.

According to Bloomberg statistics, market analysts currently expect Alibaba Group's revenue to grow 41% year-on-year to RMB 16.9 billion (about US$2.7 billion) in the fourth quarter ending in March. In comparison, Alibaba Group's revenue grew by an average of about 50% in the previous seven quarters.

Alibaba Group's strategy of expanding into rural areas of China and overseas markets is driving the company's marketing spending to rise. More and more consumers are shopping on mobile devices, which typically generate lower advertising revenue than traditional desktops. Market analysts expect Alibaba Group's operating profit in the fourth quarter to fall 18% to 4.5 billion yuan.

A crisis of confidence

“Alibaba Group has faced the obstacles and difficulties that must be overcome to reach the next level of growth,” said Matthew Kwok, chief strategist at China Yinsheng Asset Management Ltd. “The company has been very successful in the Chinese market, and it makes sense for them to replicate this business model overseas.”

As of now, Alibaba Group has not commented on this report, saying that it is currently in the silent period before the release of the financial report.

Also clouding Alibaba's growth prospects is the resurgence of claims that its platforms Taobao and Tmall are a haven for counterfeit goods. The Chinese government said this year that Alibaba was facing a "crisis of trust" because it failed to stop disreputable merchants, fake goods and misleading promotions.

Investors have punished Alibaba Group for this. While Alibaba Group's stock price has fallen, the stock price of rival JD.com has risen 46% this year, and Tencent's stock price has risen 40% on the Hong Kong Stock Exchange.

Mark Tanner, founder of market research and marketing agency China Skinny, said: "JD.com, China's second-largest e-commerce company, is gaining momentum. In the medium term, it seems impossible for Alibaba Group's previous growth rate to be sustained."

Stock price falls

Alibaba Group's stock price has fallen for five consecutive trading days as investors worry that Alibaba Group's fourth-quarter results may be lower than market expectations. Alibaba Group's stock price fell 1.3% in regular trading on the New York Stock Exchange on Tuesday, closing at $79.54, 33% lower than the highest price in November last year. Alibaba Group's stock price hit its lowest price since its initial public offering at $77.77 during the session.

Alibaba Group's current round of stock price decline began on April 29. At that time, Jack Ma said that the company had frozen all personnel recruitment due to its rapid expansion. According to Bloomberg statistics, market analysts currently expect Alibaba Group's adjusted net profit for the last fiscal quarter to be US$1.1 billion. In the past three months, market analysts have lowered their net profit expectations for Alibaba Group by 7%.

“Investors are linking all these issues together and thinking that the hiring freeze means that the results this quarter may not be good,” said Jeff Papp, senior analyst at Oberweis Asset Management. “No company would freeze hiring when everything is going well.”

Last week, Ma Yun said through the official account of Alibaba Group's Laiwang application that Alibaba Group currently has 30,000 employees, which is enough for the company to maintain operations. Ma Yun also said that the freeze on personnel recruitment also applies to some companies controlled by Alibaba Group.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.