The Alibaba stock price is down another 1.6% today (Thursday) and hit an all-time low of $58 shortly after the opening bell.
The lock-up period on $105 billion worth of Alibaba Group Holding Ltd. (NYSE: BABA) stock ended on Saturday. Since markets opened on Monday, the Alibaba stock price has dropped more than 8.8%.
A lock-up period refers to a specified amount of time in which initial institutional investors must hold onto the stock following an IPO. The lockup can last 90, 180, or in this case, 365 days from the initial public offering. After the lock-up ends, those institutional investors are allowed to sell their shares.
This is just the latest news to send the Alibaba stock price down. Throughout the summer, a slowing Chinese economy and volatility in China's stock market have contributed to downward pressure on Alibaba stock.
The Alibaba stock price also tumbled after a bearish report from Barron's reported the e-commerce stock could fall as low as $30 per share. The report cited Chinese economic struggles, increased e-commerce competition, and the company's unique corporate governance as reasons the stock will continue to fall.
The Alibaba stock price is now down 30.9% in the last three months and 51.7% from its November 2014 high of $120 per share.
But according to Money Morning Executive Editor Bill Patalon, bearish Alibaba stock predictions are off base - here's why...
Why Bearish Alibaba Stock Price Predictions Are Wrong
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According to Patalon, the pullback we've seen in the Alibaba stock price is normal after highly anticipated IPOs.
"I knew that, as a hot IPO, there was every chance the stock could - and probably would - sell off," Patalon said. "It's a 'transformational' type of company, meaning its leaders are 'planting seeds' right now that will have big future payoffs."
As Patalon pointed out, you can't look at Alibaba as a short-term investment. This is the kind of stock you buy and hold for a long period of time. The company has its sights set on the long term.
"Alibaba's moves into entertainment, media, cloud computing - these are all part of a broad vision Jack Ma and his executive team has for Alibaba," Patalon said.
Because of this global growth strategy, Patalon refers to BABA stock as a "legacy wealth" play and recommends adding to your position every time there is a major pullback in the Alibaba stock price.
He calls Alibaba a "spare-change stock" and says investors would be wise to accumulate small chunks of shares every time they have some extra cash or "spare change."
Money Morning Chief Investment Strategist Keith Fitz-Gerald agrees.
"I've spent a lot of time on the ground in China, and I think the Chinese consumer is ferocious on a level that mercantile can't contemplate," Fitz-Gerald said. "And I think that Alibaba still has a lot going for it. If it falls 50%, I think it's time to back up the truck and buy. I hope I get that chance."
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