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As Alibaba’s share price prepares to drop for a third consecutive trading day, should investors be worried about the stock’s long-term potential?

Alibaba, the Chinese e-commerce company, raised USD 25 billion during its IPO on Friday. Individual share prices peaked at USD 99.70 during the height of the IPOs excitement. The company ended the trading day at USD 93.89, a steep jump above the initial price per share recommendation of USD 68.00. The current value has since fallen to USD 87.17, at the time of writing this article. With the stock down almost 6% since Friday, should investors begin to worry?
Peter Garnry, Saxo Bank’s Head of Equity Strategy, remains optimistic stating that there is still plenty of long-term potential for the company. Garnry’s sentiment is echoed by other analysts who view the company as a ‘buy,’ sighting price targets between USD 90.00-USD 95.00. Why then has the company’s stock begun to fall when such a positive sentiment is being articulated by investors?

A large tech sell-off on Monday caused both the NASDAQ and The Standard & Poor’s 500 to fall around 1 percent each, respectfully. Facebook dropped 3.7 percent, Microsoft was down around 1.0 percent, and Yahoo fell 0.8 percent on the day. This selling pressure negatively impacted Alibaba’s stock in addition to news of decreasing demand levels in China. Despite this harmful news for China, the outlook for country’s biggest e-commerce website looks bright, with Garnry still stocking to his fair value target of USD 90.00.

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