Alibaba Group Holding Ltd (BABA) Stock Falls Despite Record Singles Day
Less than three weeks before American retailers and shoppers kick of the massive Black Friday holiday sales event, Alibaba Group Holding Ltd (NYSE: BABA) reported a record $30.8 billion in gross merchandise volume (GMV) for its Singles Day shopping event over the weekend. Analysts say long-term investors shouldn't put too much emphasis on Singles Day numbers, but there are plenty of other reasons to love BABA stock.
Singles Day is a relatively new shopping holiday in China that was created to celebrate young, single Chinese consumers. The event takes place on Nov. 11, a date when written as 11/11 is composed entirely of 1s.
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Alibaba reported a record $30.8 billion in gross merchandise volume on Sunday, up 27 percent from a year ago. Alibaba's Cainiao Smart Logistics Network processed more than 1 billion delivery orders on Singles Day.
To put the magnitude of Singles Day in perspective, Amazon.com, ( AMZN) generated $4.68 billion in sales from its 36-hour Prime Day event in July. Alibaba reportedly matched Prime Day with $4.68 billion in sales within the first 10 minutes of Singles Day.
"Today we witnessed the strength and rise of China's consumption economy and consumers' continued pursuit to upgrade their everyday lifestyles," CEO Daniel Zhang says in a statement. "Participation from the entire Alibaba ecosystem enabled our brand and merchant partners to engage with consumers like never before."
Despite the record numbers, BABA stock traded nearly 2 percent lower on Monday. Alibaba shares are down 16.2 percent overall in 2018 on fears about the ongoing U.S. trade war with China and a potential slowdown of the Chinese economy.
Bank of America analyst Eddie Leung says that, while the Singles Day sales numbers are impressive, they are in line with expectations and should be taken with a grain of salt.
"We would be cautious about focusing on these data due to more promotion campaigns throughout the year, immaterial impact to annual GMV, offsetting impact from potential cannibalization of other days' sales in the quarter and large returns and pre-ordering," Leung says.
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However, Leung says there are plenty of reasons for long-term investors to like the leading e-commerce company in China.
"Its leadership position enables it to benefit from industry growth and economies of scale," he says.
Bank of America has a "buy" rating and $221 price target for BABA stock.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.
