Alibaba: several reasons to think about “sell”

Alibaba is the largest online retailer in China and one of the world leaders in Internet trading. A better candidate for “buy” status is difficult to find. Still the situation is not so obvious.

Market professionals for rather long period of time have been shorting the company's shares. Short interest in the shares of Alibaba exceeded $ 25.9 billion, and its growth rates are double-digit. As a rule this is a losing approach - selling the company's shares, which is growing in price. But if you perceive actions as a strategy, not tactics, then the situation looks quite different.

What are the fears of stock speculators and why do they sell shares of Alibaba, even at the risk of "dipping under the water"?

There are many reasons for this. The company's revenue growth rates are slowing down while competitors (both domestic ones like Tencent and international ones, for example Amazon) are actively struggling for the largest market in the world. In addition, often the sale of Alibaba shares acts as a kind of insurance in case of problems in the economy of China. Since, if China starts to slow down in its economic development, it is Alibaba shares that will be sold first of all (due to the specifics of the market on which the company operates). And since the risk of slowing the Chinese economy is practically the systemic risk of the modern global economy, the demand for a hedge of this risk will be consistently high. So, the sale of Alibaba shares will also be stable.
Thus, it will be difficult to grow for Alibaba shares in the presence of stable and significant short interest, which amount to billions of dollars. At the same time any problems or fears of problems in the Chinese economy will lead to massive sales in the shares of Alibaba. This is the main motive for us to recommend the “sell” status for the Alibaba.