The Alibaba (NYSE:BABA) share price has had quite a rough couple of months. In fact, year-to-date, the stock has fallen by 30%. Given the level of ecommerce spending is rising with each passing day, this fall in price is quite surprising. No doubt Amazon is a current leader of the e-commerce industry. But Alibaba still stands as one of the largest e-commerce platforms that sell things from clothes, electronics, food, luxury products and even Boeing 747 cargo planes. 

So why is Alibaba’s share price unstable? And should I be adding this business to my portfolio? Let’s take a look.

What happened to the Alibaba share price?

Alibaba is currently trading at around $159 per share and has more than a $400bn market capitalisation. Due to the country’s fast recovery from the pandemic, Alibaba pushed its profits upwards by the end of 2020. As a result, sales rocketed, and the Alibaba share price spiked during the fourth quarter of last year.

Since then, the stock has been on a downward trajectory. There are undoubtedly multiple contributing factors. However, the instability seems to have started after regulators cancelled its financial division’s IPO. This was swiftly followed by a $2.8bn fine for anti-competitive practices in April a few months later. Therefore despite the improved revenue, Alibaba share price is unable to match the growth trend.

Improved financial position

Despite what its share price would indicate, Alibaba as a business has been performing rather well. At least, I think so. It reported a strong revenue surge of 34% year-over-year in its recent second-quarter report. The company is diligently focused on growth and is reinvesting excess profits and additional capital in the business. This money is used to support the company’s merchants and penetrate new markets to fuel future expansion. 

As a result, total active consumers reached a staggering 1.18 billion. That’s an increase of 45 million since the last quarter. Over the long term, the management team has outlined a strategy to increase its userbase, reaching 2.0 billion by 2036.

If things go as planned, I believe Alibaba share price could quickly reverse its current downward trajectory.

Wrapping it up

Alibaba earned the benefit from China’s speedy recovery from the pandemic. With the country’s economic activity back on track and increased online shopping, Alibaba’s sales showed tremendous growth. But what makes investors like me concerned is the current bearish trend of the company’s stock. After all, Alibaba is not the only business having to face off a crackdown from regulators. For now, I’m keeping this business on my watchlist until more light can be shed on the regulatory situation in China.