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Alibaba stock was up sharply for the third straight session early Wednesday after the company reported fiscal Q3 revenue of 260.35 billion yuan, slightly below the consensus estimate of just over 262 billion. But investors liked the fact that Alibaba (BABA) added $25 billion to its share buyback program through March 2027. BABA stock looks like it’s on sale now, but is Alibaba stock a buy now?
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Sentiment was positive in Chinese stocks again Tuesday after China’s securities and regulatory commission said it would “guide institutional investors…..to enter Chinese stock markets with greater efforts.”
The Shanghai composite on Monday closed at its lowest level since 2020.
BABA stock also surged on Jan. 23 on reports that co-founder Jack Ma and business associate Joe Tsai have been buying shares of BABA stock in recent months.
According to an SEC filing, Tsai purchased $151 million in Alibaba stock in the fourth quarter via his Blue Pool Management family fund. Ma, meanwhile, bought $50 million worth of Alibaba stock. Ma stepped down as the company’s chairman in 2019 and remains a big shareholder.
Alibaba came under selling pressure on Sept. 11 after outgoing CEO Daniel Zhang unexpectedly stepped down as head of the company’ cloud business.
The company said in June that Zhang was departing 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 said that CEO Eddie Wu would take over the company’s struggling e-commerce business.
Recent Earnings
Alibaba on Nov. 16 reported an 18% rise in quarterly profit, with revenue up 6% to $30.8 billion. BABA also declared an annual cash dividend for fiscal year 2023 of $1 per ADS. But sellers hit the stock after BABA said it’s walking away from plans to spin off its cloud unit in light of recently-expanded U.S. chip restrictions.
Sentiment was positive around Alibaba stock on August 10 as Wall Street weighed the company’s latest earnings report.
Adjusted profit increased 37% to $2.40 a share, nicely above the consensus estimate of $2.02. Revenue increased 5% to $32.3 billion, above the $30.7 billion consensus. The top-line growth halted four straight quarters of revenue declines.
Alibaba stock soared above its 200-day moving average on July 7 after Chinese regulators fined Alibaba’s financial arm, Ant Group, just under $1 billion.
Chinese regulators halted Ant Group’s IPO in late 2020 for not meeting listing requirements. In April 2021, regulators hit Alibaba with $2.8 billion fine in an anti-monopoly probe. But after three years of regulatory scrutiny, optimism is building that Beijing is close to ending its crackdown on tech firms.
Alibaba Stock News
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 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.
- Cloud Intelligence
- 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 in April.
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 weak around Chinese stocks in October after the Biden administration announced new restrictions on China’s access to U.S. 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 stock rallied sharply in late August last year on reports that Beijing and U.S. regulators were close to an audit-inspection deal.
China/U.S. Relations
In late July 2022, the U.S. Securities and Exchange Commission added Alibaba to a list of Chinese firms at risk of being delisted for not opening their books to U.S. 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.
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 lower 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
The company has a five-year annualized earnings growth rate of 8%, although fundamentals have weakened considerably in recent quarters.
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Alibaba’s Composite Rating of 66 (on a scale of 1-99 with 99 being the best) has fallen, party due to lagging price performance in recent months.
But annual return on equity of 14% helps give Alibaba a respectable SMR Rating (sales + margins + return on equity) of B from IBD Stock Checkup (on an A-to-E scale with A tops).
The Stock Checkup tool quickly identifies group leaders based on a combination of fundamental and technical factors.
Stock Market ETF Strategy And How To Invest
According to Zacks, Alibaba is expected to earn $8.80 a share in its current fiscal year 2024, up 11% compared to fiscal 2023, with growth slowing a bit in fiscal 2025, up 3% to $9.10.
Click here to the top-rated stocks in the group.
Alibaba Stock Technical Analysis
Alibaba’s relative strength line has been trending sharply lower after several months of underperformance vs. the S&P 500.
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 improved to B+, helped by some higher-volume gains in recent days
BABA Stock: Is It A Buy Now?
Overhead supply issues are still a concern for Alibaba stock with the stock more than 30% off its high.
Alibaba stock gapped above its 50-day line on Nov. 15 and closed near its session high on a strong day overall for Chinese stocks. Normally, it would’ve been a buy signal but BABA’s 200-day moving average at the time around 89.50 was a potential resistance level to watch.
Alibaba stock has started to climb off lows and is trying to break out of a downtrend with BABA back above its 50-day line.. With sellers dictating the action since early August, Alibaba stock is not a buy. But a move above the 20o-day line, currently around 84, would be enough to break BABA stock out of its latest downtrend.
Follow Ken Shreve on Twitter at @IBD_KShreve for more market insight and analysis right now.
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