Binary options traders should be keeping their eye on Alibaba stock over the coming weeks and months. So far, Alibaba's 2015 has been absolutely horrible. In the past 3 months, the stock has fallen from $103.60 to $82.36; and looks like it will continue to fall. However, analysts still seem to have a positive view of the stock. While price targets are being reduced, it doesn't seem as though the analysts are looking deep enough into the core issues that face Alibaba to see why it is that the stock is falling, and how long it's likely to last. So, today, I'll explain why Alibaba is having a hard time, and why the stock isn't likely to recover any time soon.
Alibaba's Core Business Is Business To Consumer
In Chinese markets, there are 2 main types of business, B2C or Business to consumer and B2B or business to business. Alibaba's core business focuses on sales to consumers as an online market place. While there's nothing wrong with that looking at it from the outside, when you look at the evolution of where most sales are going in China, the problem becomes pretty clear to see. Currently, about 60% of sales in China are B2C. However, market conditions are changing and B2B is starting to reign supreme. As a matter of fact, analysts expect B2C market share to drop to about 40% and B2B to rise to about 60% over the next two years. That will surely be a major hit to Alibaba.
Alibaba Still Hasn't Done Anything About Fake Orders
A few weeks, maybe even a month ago, the big story surrounding Alibaba was the fact that there was quite a bit of “brushing” going on. Brushing is when manufacturers hire people to purchase their products and leave positive reviews. While the practice is illegal in the US, China, and many other nations, it seems as though brushing was the cause of much of the growth we saw in the company. So, US regulatory departments asked Alibaba about it and decided to investigate. While Alibaba did announce that they gave access to the regulatory departments, they didn't address how they plan to solve the issue. Unfortunately, we haven't seen an answer as to how they plan to do so as of yet either.
Is There Any Positive News Surrounding The Stock?
While the fundamental news about the stock seems to be all negative; when you look at it from a technical perspective, it does look like it could end up turning the other way. With the stock trading at such a low, it seems like technically, there's no resistance below the price.
In other good news, Alibaba did recently sign a deal with BMG; giving Alibaba the right to stream more than 2.5 million copyright protected recordings from artists like the Rolling Stones, Bruno Mars, John Legend, and more.
So, What Can We Expect To See From Alibaba Stock
While from a technical standpoint, it seems like this one has nowhere to go, but up; technically, it's looked like that for the past month, and we haven't seen much. The key factor with Alibaba is the fundamental factor. The reality is that with fake orders and a dwindling market share plaguing the company, they're reaching for straws at this point. Even the good news, the fact that they've signed with BMG is bad news because it shows that they are desperate enough to try and compete in the already diluted streaming music space. All in all, I think Alibaba is a sinking ship – for those with a long term interest in Alibaba stock this may be a problem but for us binary options traders we can ride a down trend as much as we can an uptrend.