Alibaba Group Holding Limited (NYSE:BABA) analyst forecasts appear to be pessimistic

Alibaba Group Holding Limited (NYSE:BABA) analyst forecasts appear to be pessimistic

Alibaba Group Holding Limited (NYSE:BABA) analyst forecasts appear to be pessimistic

After Alibaba Group Holding Limited’s (NYSE:BABA) recent earnings announcement in March 2019, analyst forecasts appear to be pessimistic, with earnings expected to decline by 7.0% in the upcoming year compared with the past 5-year average growth rate of 17%. Presently, with latest-twelve-month earnings at CN¥88b, we should see this fall to CN¥81b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

See our latest analysis for Alibaba Group Holding

How will Alibaba Group Holding perform in the near future?

Longer term expectations from the 47 analysts covering BABA’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

NYSE:BABA Past and Future Earnings, August 5th 2019
NYSE:BABA Past and Future Earnings, August 5th 2019

From the current net income level of CN¥88b and the final forecast of CN¥154b by 2022, the annual rate of growth for BABA’s earnings is 16%. This leads to an EPS of CN¥52.33 in the final year of projections relative to the current EPS of CN¥33.95. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 23% to 19% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Alibaba Group Holding, I’ve put together three important aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Alibaba Group Holding worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Alibaba Group Holding is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Alibaba Group Holding? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

Technical Indicators

Overall, the bias in prices is: Downwards.

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

By the way, prices are vulnerable to a correction towards 168.12.

The projected upper bound is: 162.29.

The projected lower bound is: 144.96.

The projected closing price is: 153.62.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 19 white candles and 31 black candles for a net of 12 black candles.

A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 5 falling windows in the last 50 candles–this makes the current falling window even more bearish. The two candles preceding the falling window were black, which makes this pattern even more bearish.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

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 9.7856. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 5 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 27.36. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 43 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 -254.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 5 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 sell 3 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -7.330 at 153.670. Volume was 29% above average (neutral) and Bollinger Bands were 16% wider than normal.

Open     High      Low     Close     Volume___
155.200 157.230 151.850 153.670 4,880,625
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 171.73 165.86 164.65
Volatility: 40 34 42
Volume: 3,897,548 4,083,987 3,797,509

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 gapped down today (bearish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
ALIBABA GRP ADR is currently 6.7% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of BABA.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on BABA.N and have had this outlook for the last 2 periods. Our momentum oscillator is currently indicating that BABA.N is currently in an oversold condition.

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