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Barron’s: Alibaba Stock Could Lose 50% More Value in China’s Unsteady Economy

Alibaba, China’s e-commerce king, hasn’t seen since the same success following its initial public offering when shares of the company’s stock surged 75 percent in the first two months.

But downward has so far been the stock’s trend.

In its cover article in this week’s issue, financial investment publication Barron’s said Alibaba’s shares—which fell below the $68 initial price to $62.60 Monday—could fall much lower as China’s economy falters and e-commerce competition flourishes.

According to Barron’s, Alibaba’s stock value could fall a further 50 percent.

Consumer spending has already slowed in China, a fact Alibaba blamed for its dip from 50 percent transaction volume in recent years to just 34 percent in June, and the way the country’s economy is looking, shoppers may not be shelling out more cash all that soon.

Barron’s report also cited recent scrutiny of Alibaba’s company policies, like those surrounding selling counterfeit goods on its two major retail platforms, Taobao, where small businesses sell to consumers, and Tmall, where bigger global brands target Chinese shoppers, as a reason for the company’s potential descent.

The company’s market value rings in at $160 billion but Barron’s said its stock price is trading 25 times analysts’ earnings estimate for the coming year when it should be trading closer to eBay’s 15 times multiple.

Alibaba, however, feels just fine about its financial position and Jim Wilkinson, the company’s senior vice president of international corporate affairs, said in a response letter to Barron’s that the article “contains factual inaccuracies and selective use of information, and the conclusions he draws are misleading.”

Wilkinson said, “Comparing Alibaba’s PE [price-earnings] multiple to eBay’s PE multiple is flawed because eBay does not operate in China. A more relevant comparison would be with our large-cap Chinese Internet peers.”

Alibaba stood by its position and financials, saying its Taobao and Tmall marketplaces are still unrivaled in China, it has spent more than $160 million over the last two years to improve policies to curb counterfeits and that, when appropriately compared with its Chinese counterparts like Tencent and Baidu—not eBay, its multiple of 25 isn’t far off from Tencent’s 31 times and Baidu’s 24.

The company has requested Barron’s issue a correction.