(Bloomberg) — Alibaba Group Holding Ltd., a Chinese e-commerce company, has seen a significant decline in its stock price, with its valuation at an all-time low and market capitalization comparable to that of its rival, PDD Holdings Inc. Options traders are predicting further challenges ahead as the company prepares to release its earnings report. According to the derivatives market, there is a heightened bearish outlook, with the most traded put contract on Monday in Hong Kong betting on a 14% drop in the stock by the end of April.Alibaba’s revenue for the last three months of 2020 is anticipated to have grown by 5.6%, marking the slowest growth in three quarters due to challenging economic conditions and aggressive discounting. Additionally, the company’s forward earnings estimates have decreased by around 4% over the past month. Alibaba and JD.com Inc. are facing new competitors like Douyin Mall, operated by ByteDance Ltd., adding to the pressure in the crowded Chinese online retail market, where discounter Pinduoduo is emerging as a key player due to deflationary forces and declining wages.”The focus is whether Alibaba can survive the macro weakness,” said Tam Tsz-Wang, an analyst at DBS Vickers Hong Kong Ltd. “The market is expecting it to lose market share as they face fierce competition from rivals like Douyin and PDD. Another focus would be whether they are able to import new drivers to maintain their overall growth.”At present, Alibaba’s stock is trading at 8 times forward earnings, near its lowest valuation ever, making it one of the cheapest technology stocks in China. The company has allocated $9.5 billion for share buybacks in the last year and has approximately $12 billion remaining through 2025 for repurchases. Goldman Sachs Group Inc. analyst Ronald Keung suggests that Alibaba may utilize half of its free cash flow for buybacks and could even declare special dividends after business divestments.Options traders are showing greater pessimism, as seen in the increase in put options trading volume in recent days. The market anticipates a 5.6% share move in either direction after Wednesday’s earnings report, one of the biggest post-earnings moves for the stock in two years.The company’s new management is leading efforts to revamp its strategies, prioritizing its core operations while scaling down non-core businesses and increasing investments in global expansion and artificial intelligence. The focus on lower-priced products to meet demand may lead to weaker revenue growth, impacting near-term sentiment and the stock price, according to JPMorgan Chase & Co. analysts including Alex Yao, who reduced their profit estimate for Alibaba by 3% last month. They anticipate that the company’s core business growth will likely “remain lackluster in the next four quarters.”
