Alibaba Loses $100 Billion: Food Order Wars Crashes Shares 🍜

Intense price competition in China's online food ordering industry has wiped more than $100 billion off Alibaba's market value. Shares traded on the Hong Kong Stock Exchange have fallen 28 percent since their March peak, losing nearly twice as much as the technology index. Shares of JD.com and Meituan fell by similar proportions.

ELE.ME's New Role: Strategic Move or Financial Burden? Alibaba has integrated food ordering platform ELE.ME into its main business after JD.com's aggressive entry into the industry. This transformation, launched in February, resulted in increased subsidies and intensified campaigns. In the June quarter alone, Alibaba, JD.com and Meituan collectively spent nearly $4 billion in coupons and discounts. This situation increased both operational costs and began to strain the cash positions of companies.

The Risk of Regulation Increases The Chinese government often warns companies because of the negative effects of excessive price competition on driver health, food safety, and quality of service. These warnings raise concerns that competition in the sector could spiral out of control. In particular, Meituan's switch to “attack mode” and JD.com's new incentive plans signal that the competition will become even tougher. Possible state intervention could rein in the sector, but in the process investor confidence could be seriously shaken.

AI Wind Fades: Strategic Priority Shift Alibaba saw its shares rise more than 80 percent in two months with DeepSeek-led artificial intelligence projects earlier this year. But investor interest has turned to rising food order losses in recent months. This could push AI and cloud investments into the secondary as the company shifts its strategic resources to short-term campaigns. Investors are concerned about the risk that long-term growth targets will be disrupted.

Loss Forecasts and Analyst Reactions Goldman Sachs predicts Alibaba's food ordering unit could make a loss of 41 billion yuan, or about $5.7 billion, over the next 12 months. That figure equates to about a third of the company's net income for the fiscal year ending in March. HSBC, on the other hand, stressed that short-term profitability would be severely depressed, and lowered its price target for Alibaba by 15 percent. These revisions have negatively impacted investor perception, increasing pressure on the stock.

Valuation Opportunity or Deepening Risk? Alibaba shares have fallen to a historically cheap level, trading below 11x in terms of price/earnings ratio. Since the beginning of May, the company's forward earnings per share forecast has fallen by about 6 percent. Although 44 of the analysts still advise “buy”, investors are questioning whether this cheapness is a real opportunity or a sign of deepening risk. This level, which seems attractive to value investors, is marred by short-term losses and strategic uncertainties.

The Problem of Long-Term Trust Franklin Templeton portfolio manager Nicholas Chui maintains a cautious stance, saying “Companies that forgo profitability for the sake of gaining market share may lose the long-term investor.” Julia Pan, an analyst at UOB Kay Hian, says government intervention could limit price wars, which could provide relief across the sector. Alibaba's low valuation raises “buy on the decline” opportunities at this point, but the long-term strategic stability of the company is not yet clear.

🧠 Expert Review

Alibaba may be challenged in the short term by intense competition and subsidy costs. In the medium term, government intervention and easing competition could ease operational margins. In the long term, the re-emergence of strategic segments such as artificial intelligence and cloud computing could revitalize the company's growth potential. But in the process, investors should be prepared for volatility and closely monitor the company's capital allocation strategy beyond valuation.

🛑 Disclaimer

This content is created by the Investment Desk and does not constitute investment advice. You should make your decisions based on your own research and expert advisors.

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