A slowdown in Alibaba Group Holding Limited (NYSE:BABA) earnings and revenue is coming

A slowdown in Alibaba Group Holding Limited (NYSE:BABA) earnings and revenue is coming

A slowdown in Alibaba Group Holding Limited (NYSE:BABA) earnings and revenue is coming

The fiscal third quarter is an important one for Alibaba because it includes its annual Singles Day sales extravaganza, which takes place on Nov. 11. It’s the largest single day of sales for the company, and revenues have grown significantly every year. In 2018, the event again set a new record for gross merchandise value (GMV) — $30.8 billion — and sales grew 27% year over year. But that was much weaker growth than the previous year’s 39%. 

In fact, the 2018 event delivered the slowest growth rate in the decade that the company has been promoting Singles Day.

That same month, Alibaba lowered its revenue guidance by 4% to 6% in yuan terms for the fiscal year that ends March 30. Management noted that the revision was due to macroeconomic conditions in China, including the trade war with the United States, and the fact that the Chinese economy grew last quarter at its slowest pace since 2009.

Matters aren’t looking better in the new year. Alibaba President Michael Evans seemed to be warning investors to temper their expectations for his company as he talked about the slowing China economy at the National Retail Federation’s annual conference on Jan. 14. “As a $13 trillion economy, it would be quite unusual if it could continue to grow at 7% or 8%,” Evans said. 

Alibaba is expected to report revenue of $17.7 billion and earnings of $1.68 per share, based on the average estimate of 29 analysts polled by Yahoo! Finance. This estimate would represent a 38.3% year-over-year increase in revenue and 19.2% growth in earnings. That’s a significant deceleration  from the fiscal Q3 2017, when it reported 56% year-over-year growth in revenue and 33% growth in earnings. 

Revenue growth below 40% would be a dramatic outlier for Alibaba, which has delivered a stunning eight straight quarters of revenue growth over 50%. Even in fiscal Q2, when the economic headwinds first intensified, it managed to grow revenue by 54% to $12.4 billion. However, that result still fell short of estimates. 

But while Alibaba’s revenue isn’t expected to increase quite so dramatically this quarter, 38% growth would still be nothing to scoff at, especially amid today’s less-than-ideal macroeconomic conditions. 

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 167.75.

The projected lower bound is: 146.78.

The projected closing price is: 157.27.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 83.4716. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 63.85. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 16 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 102.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 10 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 1.050 at 157.020. Volume was 15% above average (neutral) and Bollinger Bands were 32% wider than normal.

Open High Low Close Volume___
158.590 159.480 154.740 157.020 5,213,405

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 151.28 148.16 170.28
Volatility: 28 46 43
Volume: 3,655,613 4,336,693 4,259,586

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

ALIBABA GRP ADR is currently 7.8% below its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of BABA.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on BABA.N and have had this outlook for the last 4 periods.

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