Alibaba's Stock Plummets: Options Traders Bet Big On Further Stock Slide

The future of Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) looks increasingly uncertain as options traders foresee a prolonged slump in its stock value.

What Happened: Alibaba’s shares have plummeted by 75% from their 2020 peak, dragging its valuation to an all-time low, reported Bloomberg. This has put the company’s market capitalization on par with that of its rival, PDD Holdings Inc (NASDAQ:PDD).

Options traders are predicting more turbulence, with the options skew indicating increased bearishness just before Alibaba’s earnings report, which is scheduled for Wednesday. A put contract, betting on a further 10% drop in the stock by the end of April, was the most traded on Monday.

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Despite this, the shares saw an increase of up to 7% in Hong Kong on Tuesday, possibly due to optimism regarding positive earnings. Alibaba’s revenue for the last three months of 2023 is expected to have risen by 5.6% from the previous year, marking the slowest growth in three quarters due to challenging economic conditions and heavy discounting.

Why It Matters: Alibaba’s future has been uncertain for some time now. The company’s shares have seen a 75% drop from their 2020 high, and the withdrawal of its cloud unit’s IPO added to its challenges. The company’s troubles have been compounded by the strategic decision to sell off certain consumer sector assets in a bid to refocus on its core e-commerce operations.

Despite these challenges, the company’s performance in its fourth-quarter earnings report could provide a much-needed boost for investors. The recent surge in Alibaba’s shares in Hong Kong amid the general market downturn suggests that some positive news may come on Wednesday.

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