Alibaba (BABA) is a leading technology company that provides cloud computing, e-commerce, and entertainment services in China and the Asian region. It has a market cap of over $205 billion, making it the fifth biggest company in China.
Alibaba Group owns several businesses that have a dominant market share in the country. Its best-known brands are Taobao, Tmall, and Aliexpress. Additionally, like Amazon, the company has expanded its business to offer cloud computing solutions, mostly to other Chinese companies.
Alibaba Cloud has become an important company now that China and the United States are going through tensions. As a result, the Chinese government has encouraged local firms to use Chinese firms for cloud computing. Alibaba also owns other popular brands like Youku, Damai, Sun Art, and Alibaba Health.
The past few years have been painful for Alibaba as its stock has lost over half of its value. It has faced scrutiny from the government, its revenue growth has stalled, while competition from JD, PDD, and Tencent has jumped.
Now, however, the stock has started recovering and has soared by over 30% from its lowest point this year. It was trading at $88 on Thursday.
Positive hype
Alibaba stock formed a golden cross pattern in August as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. In most cases, this pattern often leads to more gains since it signals that bulls are in control.
Alibaba is returning substantial sums of money to investors through share repurchases. As a result, the number of outstanding shares dropped from over 2.72 billion in 2021 to 2.37 billion. It repurchased stock worth $5.8 billion last quarter.
Alibaba will share its vision for artificial intelligence (AI), the fastest-growing technology in the industry. It will do this at the Aspara Conference in Hangzhou. Analysts expect it to talk about how it plans to challenge companies like Amazon and Microsoft.
The company recently completed a three-year regulatory review after shedding monopolistic practices. This is a big deal since regulatory issues have contributed to its weak performance.
Alibaba published results that beat analysts' estimates. Its revenue rose to over $33 billion in the last quarter while its adjusted EBITDA dropped slightly to over $6.19 billion.
Its cloud computing division’s revenue rose by 6% to over $3.6 billion. Alibaba Cloud was the only Asian company in the recent Gartner Magic Quadrant for data science and machine learning.
Alibaba is one of the cheapest big tech companies to invest. It has a forward P/E ratio of 13.40, lower than the industry average of 17. Companies like PDD Holdings and Amazon have a much higher figure.
Alibaba stock is a bargain, according to estimates. It has a stock target of $108, higher than the current $84.42.
Negative hype
Alibaba’s cloud computing division is seeing weaker growth than Azure, AWS, Google Cloud, and IBM. This slowdown is mostly because it will struggle to attract more customers from international customers, who prefer the likes of AWS and Azure.
Chinese tensions could rise if Donald Trump wins the election. Trump has pledged to be tough on China. As we saw in the last trade war, companies like Alibaba that are listed in the US tend to be victims.
Alibaba’s business is no longer growing as it used to before. It has struggled to have double-digit growth while companies like Amazon and PDD are seeing strong growth.
It is facing substantial competition from companies like PDD and JD, which has affected its revenue growth.
Chinese economic data shows that the economy is slowing. Some of the most recent numbers show that retail sales and manufacturing output have dropped.
Summary of Alibaba stock
Alibaba stock price has staged a good recovery after bottoming at $65.13 in January. It has formed a golden cross pattern as the 50-day and 200-day moving averages crossed each other.
It has also moved above the ascending trendline that connects the lowest swing since January. The Relative Strength Index (RSI) has formed an ascending channel. Therefore, the stock may continue rising as bulls target the next point at $98.91, its highest point in July 31st. This forecast is in line with our previous Alibaba outlook.
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