Alibaba shares jumped in premarket trading on Friday after Chinese regulators said the company had successfully completed a three-year regulatory process. Alibaba (BABA) was fined $2.6 billion in 2021 for monopolistic practices.
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It hasn’t been the best of times for Alibaba stock in recent years amid declining fundamentals, but BABA shares have recovered nicely from lows after hitting a low of 71.80 in late June. Alibaba is no longer the growth engine it once was, but revenue growth should accelerate in the coming quarters as the Chinese consumer slowly recovers.
Recent Income
In mid-August, Alibaba reported adjusted earnings of $2.26 per share. Revenue growth accelerated from the previous quarter, rising 4% to $33.5 billion.
Sellers hammered Alibaba shares on May 14 despite a slight revenue gain, though buyers pushed the shares far from the lows at the close. Buyers were in control for the next three trading sessions, sending the shares up more than 11%.
On an adjusted basis, Alibaba earned $1.40 per share, down 10% year-over-year. Revenue rose slightly 1% to $30.7 billion.
Alibaba also announced a two-part dividend. It includes an annual cash dividend of $1 per American Depository Share and a “one-time extraordinary cash dividend” of 66 cents per ADS. The total dividend will cost $4 billion, the company said.
BABA shares jumped sharply on Feb. 6 after the company reported fiscal Q3 revenue of $36.7 billion, up 2% from the year-ago quarter and slightly above the $36.16 billion consensus. But adjusted earnings fell 4% to $2.67 per share.
Investors also welcomed the fact that Alibaba added $25 billion to its share buyback program through March 2027.
Three months earlier, Alibaba’s shares fell in mid-November despite an 18% increase in quarterly profit and 6% revenue growth.
Alibaba Stock News
BABA shares rose on Jan. 23 after it was revealed that co-founder Jack Ma and business partner Joe Tsai had bought shares of BABA in recent months.
According to an SEC filing, Tsai bought $151 million worth of Alibaba shares in the fourth quarter through his Blue Pool Management family fund. Ma, meanwhile, bought $50 million worth of Alibaba shares. Ma stepped down as chairman of the company in 2019 and remains a major shareholder.
Alibaba came under pressure on September 11 when outgoing CEO Daniel Zhang unexpectedly resigned as head of the company’s cloud division.
The company said in June that Zhang would step down as chairman and CEO of the company to focus on Alibaba’s cloud intelligence unit. In May, Alibaba announced plans to spin off its cloud business as a separate, publicly traded company.
In December, the company announced that CEO Eddie Wu would take over the company’s struggling e-commerce division.
Alibaba shares rose above their 200-day moving average in July 2023 after Chinese regulators fined Alibaba’s financial arm, Ant Group, nearly $1 billion.
Chinese regulators blocked Ant Group’s IPO in late 2020 because it failed to meet listing requirements. In April 2021, regulators fined Alibaba $2.8 billion in an anti-monopoly investigation. But after three years of regulatory scrutiny, optimism is growing that Beijing is close to ending its crackdown on tech companies.
In March 2023, Alibaba announced plans to split into six separate units.
The company said each company will have the option to raise outside funding and even pursue an IPO. The report said the company would likely stick to its cloud/artificial intelligence business and its massive e-commerce business.
- Cloud intelligence
- Taobao Tmall Trade
- Local services
- Cainiao Smart Logistics
- Global digital trade
- Digital media and entertainment
China/US Relations
Sentiment around Chinese stocks was weak in October after the Biden administration announced new restrictions on China’s access to U.S. semiconductor technology. These included stricter rules on the sale of chip equipment to China and tighter restrictions on the export of certain types of chips used in supercomputing and artificial intelligence.
Alibaba’s shares surged in late August 2023 after reports that regulators in Beijing and the US were close to an agreement on an audit review.
In recent years, stricter regulations have taken a heavy toll on Alibaba and other Chinese stocks. In addition to strict regulations, Chinese stocks are also dealing with a slowing economy.
In April 2020, Chinese regulators fined Alibaba $2.8 billion following an anti-monopoly investigation. At the time, it seemed that BABA stock was poised to break out of a downtrend. But the stock was rejected at its 50-day moving average. In late April, it tried to climb back above the 50-day line, but sellers pushed the stock down again.
Fundamental Analysis of Alibaba Stock
The company has annualized earnings growth of 3% over the past five years, but has suffered from recent earnings declines.
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Alibaba’s Composite Rating of 53 (on a scale of 1-99, with 99 being the highest) is lukewarm, negatively impacted by weak fundamentals and weak price performance over the past 12 months.
But an annual return on equity of 16% earns Alibaba an excellent SMR (revenue + margins + return on equity) rating of A from IBD Stock Checkup (on a scale of A to E, with A being the maximum).
The Stock Checkup tool quickly identifies group leaders based on a combination of fundamental and technical factors.
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According to Zacks, Alibaba is expected to earn $8.32 per share in current fiscal year 2025, a decline of 3% compared to fiscal year 2024. For fiscal year 2026, earnings are expected to increase 13% to $9.41 per share.
Click here for the top rated stocks in the group.
Technical Analysis of Alibaba Stock
Alibaba’s relative strength line is starting to rise again despite a weak relative strength rating of 39.
A stock’s relative strength line, found on daily and weekly charts on Investors.com, compares the stock’s daily price performance to the S&P 500. An upward-moving RS line means the stock is outperforming the S&P 500. A downward-moving line means the stock is underperforming the S&P 500.
Alibaba’s Accumulation/Distribution Rating is respectable at B. The rating is helped by higher volume price increases. Higher volume price decreases will weigh on the rating.
BABA Stock: Is It a Bargain Right Now?
Overhead supply issues are still a problem for Alibaba shares, but the stock was poised to break out of a downtrend early Friday. A move above the Aug. 23 high of 85.78 would qualify as a technical breakout.
Some might call Alibaba a turnaround story, with revenue growth expected to accelerate in the coming quarters.
For the quarter ending September, revenue is expected to rise 7% to $33.6 billion, with revenue growth of 8% to 9% expected for the next three quarters.
Follow Ken Shreve on Twitter at @IBD_KShreve for more market insight and analysis immediately.
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