The share price of Chinese e-commerce giant Alibaba Group fell 5.9% in New York yesterday, the sharpest drop the company has suffered since June 2016, Bloomberg reports.
The fall was precipitated by news that the group’s operating margins shrank to 31% in the last quarter of 2017 from 39% during the same period the previous year. The squeeze is caused by the company’s high-profile investments in brick-and-mortar retail and digital media companies late last year.
However, Alibaba’s revenues are still growing strongly and are forecasted to continue doing so. The company reported revenues above analysts’ predictions this week and raised its forecast for growth in 2018 to 55-56%.
Alibaba also plans to take a 33% stake in Ant Financial, the financial technology company that the company spun off in 2011. This will be the first time that Alibaba has owned part of Ant since then, perhaps a sign that its financial affiliate is struggling. The company recently had its prospective acquisition of MoneyGram International blocked by the US government, and it also faces tough competition from Tecent Holdings and a tighter regulatory environment in China.
“This acquisition of Ant Financial’s stake could be a preparation for its potential IPO,” Steven Zhu, an analyst with Pacific Epoch, told Bloomberg.
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