Alibaba stock was poised for a higher open Thursday after the company reported earnings. BABA stock looks like it’s on sale after a recent sell-off, but is Alibaba stock a buy now?
The company reported adjusted profit of $1.56 a share, up 25% year over year, with revenue down 6% to $30.32 billion. alibaba (BABA) also said its board of directors approved the spinoff of its cloud intelligence business
BABA stock soared 14% on March 28 on reports the company plans to separate into six separate units.
The company said each business will have the ability to raise outside funding and even pursue an IPO. According to report, the company would likely hold on to its cloud/artificial intelligence business and its giant e-commerce operations.
- Taobao Tmall Commerce
- Local Services
- Cainiao Smart Logistics
- Global Digital Commerce
- Digital Media and Entertainment
Alibaba stock plunged on April 12 on news Japanese conglomerate Softbank sold most of its stake in Alibaba. At one point, Softbank owned a 25% stake in BABA worth more than $100 billion.
A day earlier, Alibaba stock reversed lower on April 11 after the company officially joined the artificial intelligence race with the launch of its own generative AI system.
Alibaba said the ChatGPT-style AI system will first be added to DingTalk, Alibaba’s workplace-messaging app, as well as Tmall Genie, a smart-speaker system.
The news comes after Baidu (BIDU) launched its own AI chatbot last month.
A 6% intraday gain for Alibaba stock on Feb. 23 faded to a loss of 0.65% despite better-than-expected fiscal Q3 results. Adjusted profit rose 5% to $2.79 a share, well above the $2.37 consensus. Revenue fell 6% to $35.9 billion, slightly ahead of the $35.76 billion consensus.
“We delivered a solid quarter despite softer demand, supply chain and logistics disruptions due to the impact of changes in COVID-19 measures,” said CEO Daniel Zhang. “Looking ahead, we expect continued recovery in consumer sentiment and economic activity.”
Alibaba stock jumped 3% on Feb. 9 on news that the Alibaba Dharma Academy — a science- and technology-focused research institute — is working on ChatGPT-like dialogue robot. But Alibaba stock gave back early gains, weighed down by weakness in the broad market.
But regulatory fears for Chinese stocks like Alibaba have been abating. A top Chinese regulator recently said the country is close to wrapping up investigations into internet platform operators like Alibaba.
Sentiment was also also positive in Alibaba stock on Jan. 9 after Goldman Sachs put Alibaba on its conviction buy list.
Alibaba, along with JD.com (JD), didn’t release specific gross merchandise volume for its Nov. 11 Singles Day, the world’s biggest annual shopping event. Alibaba did say that volume was comparable to last year, when the company reported gross merchandise volume of $84.5 billion, up more than 8% from the year-ago period. But that was a sharp slowdown from 26% growth in 2020.
Sentiment was weak around Chinese stocks in October after the Biden administration announced new restrictions on China’s access to US semiconductor technology, including restrictions on the exports of some types of chips used in supercomputing and artificial intelligence. It also imposed tighter rules on the sale of chip equipment to China.
Alibaba’s stock rallied sharply in late August on reports that Beijing and US regulators were close to an audit-inspection deal.
In late July, the US Securities and Exchange Commission added Alibaba to a list of Chinese firms at the risk of being delisted for not opening their books to US accounting regulators.
Alibaba stock jumped on June 17 but pared early gains after Reuters reported that China’s central bank accepted Ant Group’s application to set up a financial holding company.
In early November 2020, Chinese authorities suspended the $34.5 billion Ant Group IPO 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 halt the listing due to the company’s inability to fulfill conditions amid changes in the regulatory environment.
As part of its Nov. 17 earnings report, which showed adjusted profit up 5% year over year to $1.82 a share but revenue down 6% to $29.1 billion, BABA said it’s increasing its share buyback program by $15 billion. That’s on top of an existing $25 billion program. As of Nov. 16, the company said it had repurchased $18 billion worth of stock under its existing program.
In early August, Alibaba reported fiscal first-quarter revenue of $30.7 billion, down nearly 4% from the year-ago quarter but slightly above the consensus of around $30 billion. Adjusted profit of $1.75 a share was also above the $1.58 consensus.
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Alibaba’s China commerce segment fell 1% to $21.19 billion. The company’s cloud segment did revenue of $1.59 billion, up 10% year over year.
Sellers Hit BABA Stock
Increased regulatory scrutiny has weighed on Alibaba and other Chinese stocks for the past couple of years. Besides a strict regulatory environment, Chinese stocks have also been dealing with a slowing economy.
In April 2020, China regulators fined Alibaba $2.8 billion after an antimonopoly probe. At the time, it looked like BABA stock was ready to break out of a downtrend. But the stock got turned away at its 50-day moving average. It tried to rally above the 50-day line again in late April but sellers knocked the stock down again.
BABA stock crashed another 8% on Nov. 10 after Chinese regulators announced new draft antimonopoly rules for China online platforms like Alibaba and JD.com, among others.
Alibaba Stock Fundamental Analysis
In recent years, it’s hard to find a company with a more impressive track record of growth than Alibaba. The company has a five-year annualized earnings growth rate of 13%, although fundamentals have weakened considerably in recent quarters.
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Alibaba’s Composite Rating of 71 (on a scale of 1-99 with 99 being the best). is starting to drop amid recent price weakness.
Declining revenue over the past four quarters, along with annual return on equity of 16% gave Alibaba a lukewarm SMR Rating (sales + margins + return on equity) of C from IBD Stock Checkup (on an A-to-E scale with A tops ).
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According to Zacks, Alibaba is expected to earn $7.67 a share in its current fiscal year 2023, down 8% compared to fiscal 2022. But growth is expected to pick up in 2024, up 10% to $8.44.
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Alibaba Stock Technical Analysis
Alibaba’s relative strength line has started to trend lower after BABA stock hit a high of 105.05 in late March.
A stock’s relative strength line, found in daily and weekly charts at Investors.com, compares the stock’s daily price performance to the S&P 500. An upward-sloping RS line means the stock is outperforming the S&P 500. A downward-sloping line means the stock is lagging the S&P 500.
Alibaba’s Accumulation/Distribution Rating has weakened to D-, hurt by some above-average volume price declines in recent weeks.
BABA Stock: Is It A Buy Now?
Overhead supply issues are still a concern for Alibaba stock with the stock being about 19% off its high
A decisive move above the 50-day line on Nov. 15 was enough to break BABA stock out of its downtrend and give a buy signal. But the stock started to look extended after soaring 19% during the week ended Dec. 2.
Alibaba stock broke out again during the week ended Jan. 6, the same day the Nasdaq composite and S&P 500 marked follow-through days. It rallied more than 16% from before pulling back.
Alibaba’s fell sharply below its 50-day moving average on April 12, marring its cup-with-handle base. It was a flawed pattern because the handle that started forming on March 31 was slightly in the bottom half of the base.
Alibaba moved above its 50-day moving average Wednesday, but the 100 level still looms large as a potential resistance level. BABA stock still needs to prove itself, although a run to the 100 level is possible, which would be a 10% gain from Wednesday’s closing price of 90.68
Follow Ken Shreve on Twitter at @IBD_KShreve for more market insight and analysis right now.
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