Are Investors Falling Out of Love With Alibaba?

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Alibaba Group Holding Ltd. fell for a fifth day as concern mounted that the Chinese e-commerce company’s decision to freeze hiring is a sign the company will post first-quarter profit that trails analyst estimates on Thursday.

The shares sank 1.3 percent to $79.54 on Tuesday in New York in the longest losing streak in a month. They touched $77.77 earlier, the lowest intraday level since Hangzhou, China-based Alibaba’s record $25 billion IPO in September. A Bloomberg index of the most-traded Chinese stocks in the U.S. slid the most in five months.

Alibaba started its five-day decline on April 29 when Chairman Jack Ma said the company was freezing all hiring after expanding too quickly. The company is expected to post adjusted profit of $1.1 billion for the three months through March on revenue of $2.7 billion, according to the average estimate of at least 19 analysts surveyed by Bloomberg. They have cut their projections for adjusted net income by about 7 percent in the past three months.

“People are connecting the dots, believing the hiring freeze implies that this quarter wasn’t good,” Jeff Papp, a senior analyst at Oberweis Asset Management Inc., which oversees about $1.9 billion, said by e-mail on Tuesday. “Nobody does a hiring freeze when things are good. With a large IPO like Alibaba, expectations have gone from way too high to way too low. We are at the lower point now.”

30,000 Employees

The company’s current staff size of 30,000 should be enough to maintain operations, Ma said in a speech transcript posted to an official Alibaba account on the social-media application Laiwang last week. The hiring freeze also applies to some companies controlled by Alibaba, he said.

Trading volume of 32.6 million shares was double the three-month average compiled by Bloomberg. The company is scheduled to release earnings before the start of U.S. trading on May 7, its third quarterly report since its U.S. listing.

Alibaba’s revenue grew 39 percent in the first quarter from a year earlier in dollar terms, according to analyst projections compiled by Bloomberg. Adjusted net income increased 22 percent, the data show. Sales rose about 38 percent in the three months through December while adjusted profit fell 29 percent.

While market sentiment is negative ahead of the earnings report due to investor concerns ranging from tougher industry competition to the company’s aggressive investments, Alibaba’s business fundamentals remain unchanged, according to Summit Research Partners LLC.

Expectation Reset

“The reset of street expectations could mark the bottom of Alibaba shares,” Henry Guo, an analyst at Summit Research Partners who rates the stock a buy with a price target of $97, wrote in a note dated May 1.

Alibaba tumbled 8.8 percent Jan. 29, after its sales and earnings for the quarter ended in December missed the average of analyst projections. The company offered shares at $68 each on Sept. 18, and jumped 38 percent on the first trading day. It climbed as much as 75 percent from the IPO level to a record $119.15 on Nov. 10.

The Bloomberg China-US gauge sank 2.4 percent to 127.59, the lowest in two weeks. Qihoo 360 Technology Co., a computer security-software developer, dropped 8.3 percent to a four-week low of $56.30, the worst performance on the index. Bona Film Group tumbled 7.4 percent to $9.27. The film producer and distributor will report quarterly results on May 7.

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