Alibaba (TORTOISE) sold off sharply on Monday, along with other US-listed Chinese stocks, after Chinese President Xi Jinping was confirmed to a historic third term. Alibaba stock is at its lowest since September 2015, selling at 10x earnings then, but is BABA stock a buy now?
Chinese stocks have seen their share of the headlines recently. Earlier this month, sentiment weakened around Chinese stocks after the Biden administration announced new restrictions on China’s access to US semiconductor technology, including restricting exports of certain chips used in the US. in supercomputers and artificial intelligence. It also imposes stricter regulations on the sale of chip equipment to China.
Alibaba shares surged in late August on reports that Beijing and US regulators were close to reaching an audit-inspection agreement.
In late July, the US Securities and Exchange Commission added Alibaba to its list of Chinese companies at risk of being delisted for not opening their books to US accounting regulators.
Alibaba Stock News
Buyers lift Alibaba shares on Aug. 4, but BABA’s stock closes high after the company announced a partnership with the Chinese electric vehicle maker Xpeng (XPEV). Xpeng is opening a computing center that will use Alibaba’s cloud division to work on software for driverless cars. Alibaba was an investor in Xpeng before the news.
The headlines have been busy around Chinese stocks in recent months. Chinese stocks rallied on July 7 following a Bloomberg report that China is considering having local governments sell up to $220 billion in bonds to spend on infrastructure.
Alibaba shares jumped on June 17 but failed to deliver on their initial gains after Reuters reported that China’s central bank had accepted Ant Group’s application to form a financial company.
In early November 2020, Chinese authorities suspended the IPO of Ant Group worth $34.5 billion in Shanghai and Hong Kong. Ant Group is the fintech arm of Alibaba. The decision to suspend the IPO came after Shanghai exchange officials said the exchange would suspend listings due to the company’s inability to meet conditions amid the changing regulatory environment.
Sentiment is also positive around Alibaba stock and other Chinese stocks like JD.com (JD) and Pinduoduo (PDD) at the end of April. That’s when Bloomberg reported that Beijing was in talks with the US to allow regulators to conduct on-site audits of Chinese companies listed in the US.
At the beginning of August, Alibaba reported fiscal first quarter revenue was $30.7 billion, down nearly 4% from the previous quarter but slightly above the consensus of about $30 billion. Adjusted earnings of $1.75 per share were also above the consensus of $1.58.
Alibaba’s China commerce business fell 1% to $21.19 billion. Alibaba’s cloud business reached $1.59 billion in revenue, up 10% year-on-year.
Alibaba shares spiked in late May after the company reported adjusted profit of $1.25 per share, down 20% from the previous quarter but above the consensus estimate of $1.07. Revenue grew 13% to $32.2 billion, thanks to the strength of the domestic e-commerce business.
In a sign of confidence in its business, Alibaba announced it would increase its buyback program from $15 billion to $25 billion. It was repurchased 56.2 million shares for $9.2 billion.
Alibaba has yet to announce an earnings date, but last year the company reported November 18.
Seller Hit BABA Stocks
Increased regulatory scrutiny has weighed on Alibaba and other Chinese stocks over the past few years. Besides the strict regulatory environment, Chinese stocks are also facing economic slowdown, Covid shutdown, supply chain problems and inflation.
In April 2020, Chinese regulators fined Alibaba $2.8 billion following an antitrust investigation. At the time, it looked like BABA stock was poised to break out of its downtrend. But the stock has disappeared at its 50-day moving average. It attempted a recovery above the 50-day line again in late April but sellers rated the stock lower once again.
BABA shares fell another 8% on Nov. 10 after Chinese regulators announced draft new antitrust rules for Chinese online platforms like Alibaba and JD.com, among others. other platform.
Alibaba jumped 10% on December 6 on news of a management change and overhaul of its e-commerce business. Maggie Wu left the position of chief financial officer in April. Her replacement, Toby Xu, joined Alibaba in July 2018 and was appointed deputy chief financial officer in July 2019.
Alibaba also announced plans to restructure its e-commerce operations by establishing two new digital commerce divisions, focusing on international and domestic markets.
Meanwhile, the reaction of investors has become muted to the company’s performance Investor Day on December 16-17. Soon after, BABA stock fell nearly 4% on December 22 after China’s IT regulator disciplined the company for not reporting an open-source security vulnerability to the government. government.
Fundamental analysis of Alibaba stock
It’s hard to find a company with a more impressive growth track record than Alibaba. The company has a five-year annual earnings growth rate of 18%, even though earnings have declined for four consecutive quarters.
Expectations are high for Alibaba’s annual Singles’ Day shopping event in November, China’s biggest shopping day. The company did not disappoint with revenue of $84.5 billion, up from $74.1 billion a year earlier.
The company was able to deliver top-line growth despite its core e-commerce business slowing down.
Alibaba’s business in China resembles Amazon in the US Alibaba’s cloud business is showing solid growth, just like Amazon’s booming web services business.
BABA Stock: Low Rating
Alibaba’s Overall Rating 26 (on a 1-99 scale with 99 being the best) has been affected mainly by the weak price situation in recent months.
The Inventory Checker quickly identifies team leaders based on a combination of fundamental and technical factors.
Alibaba is expected to earn $7.28 a share in the current fiscal year 2023, down 12% from fiscal 2022. But growth is expected to pick up in 2024, up 9% to $7.96.
Click here to the top-rated stocks in the group.
Alibaba stock technical analysis
Alibaba’s relative strength line has started to decline amid recent selling pressure.
A stock’s relative strength line, found in daily and weekly charts at Investors.com, compares a stock’s daily price performance with the S&P 500 index. An upward sloping RS line means the stock is sloping. is outperforming the S&P 500. A downward sloping line means the stock is lagging the S&P 500.
Alibaba stock broke above a trend line on May 26, thanks to a strong earnings report. It didn’t take long for BABA stock to regain its 50-day moving average. Alibaba was sandwiched between the 50-day and the 200-day line for a while, but the support was gone
Alibaba’s Cumulative/Distribution Rating fell to D.
BABA Stock: Is it Buy Now?
Air supply is a problem for BABA stock, with Alibaba down more than 60% from its peak. That means Alibaba stock is not a buy now. A decisive move above the 50-day line could be seen, but even if BABA stock does, the 200-day line is just over 100 as potential resistance to watch.
Follow Ken Shreve on Twitter at @IBD_KShreve for more market insight and analysis now.
YOU MIGHT ALSO LIKE: