Alibaba’s US$46 billion wipe-out tests investor support

After months of exhilarating gains as hedge funds piled in and analysts upgraded target prices, Alibaba Group Holding’s stock is losing steam and leading the decline in Chinese technology shares.

Rising bearish bets on the e-commerce giant’s stock and falling earnings estimates suggest that the slide could continue, even after a US$46 billion wipe-out over the past three weeks. Quarterly earnings due Thursday (Feb 23) will likely show just slight growth in revenue. The three-month period was influenced by the reopening of China’s economy, with Alibaba focusing on cost-cutting rather than business expansion.

Chelsey Tam, equity analyst at Morningstar Asia, said: “The rally in share prices has been huge, and there’s some profit-taking now going into earnings.” Investors will want to see how Alibaba’s management judges the speed of recovery, she added.