Shares of Alibaba Group Holding Ltd. they crashed to a four-month low on Thursday after Chinese regulators launched an antitrust investigation against the e-commerce giant.
The focus of the investigation was Alibaba’s “choose one of two” policy, which requires Alibaba’s business partners to avoid contact with competitors, the Associated Press reported.
“[W]We are not surprised by the announcement of the investigation, ”wrote analyst Aaron Kessler of Raymond James, in a note to clients. “We believe the most likely outcome is the termination of these exclusive relationships, although it is difficult to quantify the potential impact on revenue (e.g., consumers by redirecting purchases to other platforms).”
Kessler reiterated the strong assessment of the purchase he had on Alibaba from at least February 2018.
Alibaba shares BABA,
it fell 15.4% on noon trading and moved towards its lowest conclusion since July 1st. The shares suffered the biggest one-day decline since entering the market in September 2014, as the current record decline of 8.8% on January 29, 2015.
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With the sale of shares, it moved into the territory of the bear market, which many at Wall Start record as a decline of 20% or more from a significant peak. The stock was currently 31.6% below its record close.
Since closing at a record $ 317.14 on Oct. 27, the stock closed as much as 19.6% at $ 255.11 on Dec. 15, before splitting some losses to $ 256.18 on Wednesday. A market close to or below $ 253.71 would make the bear market “official.”
Kessler said he believes that given the sharp drop in stocks from a record high, investors are already “greatly appreciating” concerns about the investigation. As a result, “we remain buyers” of Alibaba shares at current levels, he said.
Kessler has a target price of $ 330 on Alibaba shares, which is 52.2% above current levels.
The stock has fallen 19.6% in the past three months, while iShares MSCI China is an exchange-traded MCHI fund,
earned 7.6% and the S&P 500 SPX index,