Alibaba Group (BABA) is one of the favorite tech stocks of 2017, and the Chinese e-commerce giant is also costing short sellers around the globe the most money.

For all of last week, shorts, or people who bet a stock will go down, have $2 billion in mark-to-market losses. On Friday, with the stock gaining roughly 2%, shorts were down $597 million, according to S3 Partners, the financial data and analytics firm. So far this year, the market losses from betting against the Chinese company are $9.8 billion, a decrease of 66.4%. (See also: Alibaba Price Targets Raised Thanks to Cloud.)

“Alibaba is the worst performing worldwide short year-to-date,” said S3 Partners in a research note late last week. “Alibaba is not only the largest short in the Hong Kong/Chinese region but it is also the largest short worldwide, more than doubling Tesla [Inc.]’s (TSLA) short interest.”

Exceeding Expectations

Betting against the e-commerce company, even with online shopping in China starting to get saturated, has been a fool's bet so far this year. Not only is the company surpassing Wall Street estimates quarter after quarter, but it's getting a lot of bullish coverage from analysts who are consistently raising their price targets on the shares.

That was the case late last week after the company posted fiscal first-quarter results that exceeded expectations. For the three months ended in June, Alibaba weighed in with overall revenue growth of 56% year-over-year, core commerce revenue that jumped 58% and revenue from its digital media unit that increased 30%. Cloud computing revenue jumped 96% to $359 million. It surpassed 1 million paying customers for the first time ever in that segment. Annual active consumers on its e-commerce platforms grew by 12 million compared to last year’s fiscal first quarter while mobile monthly active users hit 529 million in June, an increase of 22 million compared to last year’s fiscal first quarter. (See also: Alibaba to Surge Another 13% on Earnings Growth: Stifel.)

The strong showing resulted in a 5% increase in the share price in the last two days of the trading week with the stock finishing Friday’s trading session up 2.18%, or $3.58, to $167.50. While shorts aren’t convinced the share increases this year—the stock is 89% higher—are sustainable, many on Wall Street do, including hedge funds. During the second quarter, four hedge funds—Appaloosa Management, Third Point, Duquesne Capital and Tiger Management—purchased shares of Alibaba and analysts raised their price targets, betting the cloud business will continue to drive growth for the company. One of the biggest bulls, Raymond James, set a $230 price target, implying there’s room for an additional 37% appreciation. All of it is bad news for shorts.

 

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