Alibaba is an E-commerce giant which has taken the internet by storm since its inception.  The company competes directly with Amazon (AMZN) and E-Bay (EBAY).  However, Alibaba’s strong point is its Chinese origin.  Because of this, they have a strong link with Chinese vendors, a key part of Alibaba’s success to this point.

Alibaba (BABA) stock experienced a sharp dip today upon releasing its earnings report before market open.  The company fell short on revenue expectations by over 5%.  However, one thing to note is that revenue for the company is 40% higher year over year.

Was the 8.78% dip in stock price today justified by the revenue miss?  Perhaps not.  Something else happened recently though as a Chinese government agency expressed criticism over Alibaba about its lack of regulation regarding knockoff items, which the website is well known for having. 

This sparked fears among investors, as the possibility of a government intervention in BABA has the potential to really hurt its bottom line.  This becomes even more frightening when you consider that China sales were one of Alibaba’s selling points, so the fact that a government agency is expressing criticism somewhat justifies the sporadic trading of late. 

Alibaba holds a Zacks Rank #2 (buy) while the E-commerce sector is a good place to be right now, as it is positioned among the top 25% of all industries.  Keep an eye on BABA, as it will be interesting to see how investor sentiment and reactions to earnings affects the volatility the stock experiences in the short term.

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