What an interesting few months it has been for China’s mega conglomerate Ali Baba (NYSE:BABA). Shares plunged in late December after it was reported that the Chinese government was investigating Ali Baba and its founder Jack Ma for antitrust issues, but many believed this to be a direct result of Ma criticizing senior members of the CCP at a symposium in October. To add to this, the United States government was looking into potentially delisting Chinese companies who would refuse to abide by American auditing regulations, after electric vehicle company Kandi (NASDAQ:KNDI) was alleged to be reporting false sales numbers.
The stock is back up about 10% after its initial fall and closed Wednesday’s trading session up 4.30% at $235.30. Still, shares are still battered and down nearly 35% from Baba’s 52-week high price of $319.32, although the company did receive some excellent news as well as make a ground-breaking announcement that may see its stock return to those levels.
First, the good news:The Department of Defense announced that it would not be delisting several Chinese companies including Baba despite the desire for outgoing President Trump to do so. Included in this alongside Baba were two other Chinese conglomerates in Tencent (TCEHY) and Baidu (NASDAQ:BIDU), and both stocks were up during the trading session as a show of optimism from investors. As the new Biden administration enters the White House by the end of this month, Wall Street is anticipating an easing of tensions between the United States and China, and this decision will certainly help.
The ground-breaking announcement from Baba came in the form of a partnership with China’s largest automaker SAIC Motor, to launch a new electric vehicle sedan in the world’s largest automotive market. SAIC Motor is a state owned automaker that is based in Shanghai, but the new line of electric vehicles will be released under the new brand of IM or Intelligence in Motion. The new vehicle will feature wireless charging technology as well as the same solid state batteries that Tesla (NASDAQ:TSLA) uses in their cars, as well as microchips from industry heavyweight NVIDIA (NASDAQ:NVDA). The new IM cars are set to be ready for orders by April at the Shanghai Auto Show, with an SUV model following suit in 2022.
So is Baba stock a buy now? At first glance these two announcements in tandem look like Baba could be out of the investor doghouse. But have things really stabilized? Jack Ma still has not been seen in public and while many believe he is laying low until the antitrust investigation clears, it is unnerving to see how much control the CCP can have over one of China’s most powerful figures. And the electric vehicle? It sounds really good because it is the hot sector, but that is a very crowded market in China with industry leaders NIO (NYSE:NIO), XPeng (NYSE:XPEV), and Li Auto (NASDAQ:LI) already well ahead in terms of infrastructure, technology, and brand appeal. Personally, I would wait for Ali Baba to stabilize before buying back in.
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