It hasn't been the best of times for Alibaba stock after a positive response to earnings in May. Alibaba (BABA) isn't the growth engine it once was, but revenue growth is expected to accelerate in coming quarters as BABA stock tries to find a bottom
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Sellers hit Alibaba stock hard on May 14 despite a slight revenue beat, although buyers pushed the stock well of lows by the close. Buyers were in control for the next three trading sessions, sending shares higher by more than 11%.
On an adjusted basis, Alibabaearned $1.40 a share, down 10% year over year. Revenue edged higher by 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.
In late March, Alibaba abandoned plans to list its logistics arm in Hong Kong, but the news didn't do anything to lift Alibaba stock out of its downtrend.
Alibaba hoped the listing of its Cainiao Smart Logistics Network would raise $1 billion at a minimum. But Alibaba pulled the listing, citing overall weakness in the Hong Kong stock market.
The cancellation of the listing poses more challenges to a restructuring plan announced last year by Alibaba, which would've split the e-commerce giant into six separate companies.
Not that long ago, Alibaba abandoned plans to spin off its cloud computing unit. It also delayed a listing of its Freshippo grocery unit.
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.
Recent Earnings
BABA stock rallied 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 profit fell 4% to $2.67 a a share.
Investors also liked the fact that Alibaba added $25 billion to its share buyback program through March 2027.
Three months earlier, Alibaba stock plunged in mid-November despite reporting an 18% rise in quarterly profit and 6% increase in revenue.
BABA stock 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.
Alibaba Stock News
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.
In March 2023, Alibaba announced 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
China/U.S. Relations
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.
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.
Alibaba Stock Fundamental Analysis
The company has a five-year annualized earnings growth rate of 5%, hurt by recent earnings declines.
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Alibaba's Composite Rating of 39 (on a scale of 1-99 with 99 being the best) is lukewarm and is hurt by soft fundamentals and weak 12-month price performance.
But annual return on equity of 16% 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.
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According to Zacks, Alibaba is expected to earn $7.85 a share in its current fiscal year 2025, down 9% compared to fiscal 2024. For fiscal 2026, earnings are expected to rise 13% to $8.83 a share.
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Alibaba Stock Technical Analysis
Alibaba's relative strength line has been trending sharply lower since mid-May, resulting in a weak Relative Strength Rating of 29.
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 is middling at C+.
BABA Stock: Is It A Buy Now?
Overhead supply issues are back in play for Alibaba stock, with BABA stock below its 50- and 200-day moving averages. For Alibaba to fully break out of its downtrend, it'll need to get above the 78 level.
Some might call Alibaba a turnaround story with revenue growth expected to ramp up in coming quarters.
For the June-ended quarter, revenue is expected to climb 6% to $34.1 billion, with 8% to 10% top-line growth expected over the next three quarters
Follow Ken Shreve on Twitter at@IBD_KShreve for more market insight and analysis right now.
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