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Alibaba Group Holding Ltd (NYSE:BABA) stock was down Monday as China’s lackluster economic data led to a sell-off, SCMP reports.
The economy also bears the brunt of the U.S. advanced semiconductor sanctions by restricting its access to sophisticated artificial intelligence chips from Nvidia Corp (NASDAQ:NVDA) and peers.
Hyperscalers like Alibaba and Baidu, Inc (NASDAQ:BIDU) need the chips to accomplish their AI ambitions. AI can prove to be a crucial benefactor for its e-commerce, logistics and cloud businesses, something that Amazon.Com Inc (NASDAQ:AMZN) accomplished.
Also Read: Alibaba And Tencent Lap Up Meta’s AI Large Language Model
Last week, the Biden administration announced tariff hikes on Chinese imports, including Chinese electric vehicles, solar cells, steel, aluminum, EV batteries, and critical minerals, effective September 27.
Economic data showed that Chinese industrial production, retail sales, and fixed-asset investment were disappointing in August. Home prices reported a record low in nine years.
Barclays flagged to SCMP the urgency of stepping up policy easing and boosting domestic demand.
The People’s Bank of China (PBOC) told SCMP it could slash banks’ reserve requirement ratio (RRR) by 50 bps, followed by another half-point cut in the first half of next year.
Alibaba stock is down close to 3% in the last 12 months.
Predicting the future in stock prices over long periods of time is challenging. Wall Street analysts use complex models that take into account interest rates, economic growth, competitive advantages, management teams and historical profitability, among a host of other factors.
If, as an investor, you want to assume most of the major factors remain stable, you can use trend analysis as a helpful tool. Using a longer term trend line or historical performance of the stock, you can aim to forecast a stock's annual rate of return.
For Alibaba, over the past 5 years, it's annualized stock performance is -13.4%, and if you assume that trend continues for another 5 years, you can expect a stock to trade at $40.81.
Using a trend line (see how to perform this function here), If you choose to use a trend line, connect your two points and look into the future to the point in time in which you're curious. Once you've identified that stock price, you may want to consider what type of conditions would need to exist for the stock to justify the share price – be it an outside influence or managerial decision making.
Price Action: BABA stock is down 1.04% at $83.81 at the last check on Monday.
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