Alibaba Group Holding Ltd (NYSE:BABA) closed on another low in the market as sentiments about the stock continue to change. In the wake of questions being asked about the validity of orders on its online stores continues to weigh in on the stock. During an interview with CNBC, Wedbush analyst, Gil Luria rubbished suggestions that the fake orders will weigh in on the stock in the long-term reiterating they don’t affect the company’s economics.
Alibaba Group Holding Ltd (NYSE:BABA) is trading at its all-time lows, since going public as a number of negative sentiments and news continue to put more pressure on it. Early in the week there were reports that the Taiwan government had ordered the company to withdraw from the country in six months adding more pressure on a company that has been the subject of dealing with counterfeit products.
Investors who had done their work right, could have anticipated the current wave of challenges according to Luria, who believes they will not have a major impact on the stock in the long-term.
“For the investors that did the work last year I think they were well aware of this issue and I think you even cover them and a lot of media outlets covered them. It is just a matter of the fact that the sentiments were so overwhelming positive that people ignored them. [..] Amazon.com Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY), took many years before they got the authentic merchandise,” said Mr. Luria
Fake volume orders that have weighed in on the stock in the recent past don’t generate any revenue and thus won’t affect Alibaba Group Holding Ltd (NYSE:BABA)’s economics going forward according to the analyst. Just like Google Inc (NASDAQ:GOOGL), which has been trying to combat SEO on search, Alibaba is facing the same predicament in combatting fake orders and counterfeit product. The problem having not gotten worse according to the analyst means the company is on track to curtail the vices
Soon to be expired lock-up period expiration in mid-march is another crucial event that should be of concern to investors. Luria remains bullish that Alibaba Group Holding Ltd (NYSE:BABA) is on track to continue on the growth pattern despite the recent wave of setbacks
“On the lockup expiration, I think Alibaba is so liquid that it can absorb a decent amount of supply. The driver is simply going to be the fact that it is growing 30-40%, it’s got 50% plus EBITDA margins. If it doubles its earnings in the next two –three years, which appears to be on track to doing and the multiple doesn’t contract. Those are going to be the types of returns it gets,” said Mr. Luria
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