Alibaba Stock Gets Relief After Lawsuit Settlement

This could be BABA's worst quarter in two years

The shares of Alibaba Group Holding Ltd (NYSE:BABA) are up 2.3% this morning at $142, after the company settled its class-action lawsuit in California. The Chinese e-commerce concern will have to pay $75 million through insurance payouts to settle a dispute initiated back in 2015.

Despite the upside today, it's been an ugly end to 2018 for Alibaba stock, which fell to a fresh annual low of $129.77 last Monday. The shares tested that $130 level back in late October, and the subsequent bounce from there was neatly blocked by $170 level and their 120-day moving average. For the quarter, BABA has shed 15%, its worst since December 2016.

Analysts are firmly entrenched in the bullish camp. All 21 of the brokerages covering BABA rate it a "buy" or better, while its consensus 12-month price target of $202.68 is a 45.7% premium to Friday's closing perch of $139.09.

However, shorts are slowly building up their courage. Short interest increased by 8.3% in the last two reporting periods to 115.23 million shares, the most since early August. This represents a healthy 8.5% of the stock's total available float, and 6.1 times the average daily trading volume.