Alibaba (NYSE:BABA) stock registered a strong performance in 2019 and rose 55%. As a result, Alibaba stock was one of the best technology stocks out of China. The stock carried the momentum into 2020 and rose about 9.0% just 13 days into the new year. However, the situation has changed. Now, Alibaba stock is in negative territory year-to-date.
The coronavirus outbreak disrupted normal business operations around the world and rattled investors. Globally, stocks have been falling as investors go for safe-haven investments like bonds. Alibaba has been caught in the mess due to the nature of its business. Also, the company is in China—the epicenter of the coronavirus outbreak. As a result, the stock has faced tremendous pressure.
If you want to put your money on Alibaba stock, here are three things you should know.
Alibaba stock took a hit due to revenue warning
Alibaba warned that the revenue from its core e-commerce business will fall in the current quarter due to headwinds from the coronavirus outbreak. In a bid to curb the spread of the deadly virus, China has put several cities on lockdown. Due to the restrictions, businesses and factories don’t have a big enough workforce to operate as normal. The labor shortage impacted the production of goods. Companies like Alibaba face delays in delivering packages to customers.
Plan to boost sales, outbreak hits consumer purchases
Alibaba isn’t standing by and watching the coronavirus roil its business. The company plans to boost its retail sales during this difficult time. Alibaba will provide about $144 million in subsidies to encourage people to shop on its online platforms.
Although Alibaba runs a diversified operation, the company derives most of its revenue from the commerce business. The company’s commerce sales rose 38% year-over-year to 141.5 billion yuan in the December quarter and contributed 88% of its total revenue. Alibaba stock has fallen about 7.0% since the company reported its earnings for the December quarter.
Ant Financial refuses to be held back by the coronavirus
Ant Financial, Alibaba’s financial services affiliate, has continued to build its business even though the coronavirus outbreak disrupted economic activities around the world. Recently, the company purchased a stake in Swedish fintech startup Klarna. The transaction allows Ant to extend its global reach.
Ant Financial provides an array of technology-based financial services from processing payments to making loans. The company has global ambitions. A few years ago, Ant Financial attempted to acquire MoneyGram (NYSE:MGI)—a US money transfer company. However, the Trump administration blocked the acquisition.