Alibaba Group Holding Limited (NYSE:BABA) coronavirus outbreak is helping to accelerate digital transformation with more online grocery orders, work-from-home experiences

Alibaba Group Holding Limited (NYSE:BABA) coronavirus outbreak is helping to accelerate digital transformation with more online grocery orders, work-from-home experiences

Alibaba Group Holding Limited (NYSE:BABA) coronavirus outbreak is helping to accelerate digital transformation with more online grocery orders, work-from-home experiences

Shares of Alibaba Group Holding Ltd. fell Thursday, after the company posted better-than-expected results for its fiscal third quarter but discussed how the recent coronavirus outbreak in China was having a “negative impact” on the company’s commerce business in the current period as packages aren’t getting delivered on time.

The company posted net income of 52.3 billion Renminbi ($7.5 billion), or RMB19.55 a share, up from RMB33.1 billion, or RMB12.64, in the year-earlier period. Adjusted earnings per share rose to RMB18.19 from RMB12.19 and came in above the FactSet consensus, which modeled RMB15.91.

Alibaba’s BABA, -1.76% revenue for the quarter increased to RMB161.5 billion, up from RMB117.3 billion a year earlier. The FactSet consensus was looking for RMB159.7 billion. The Chinese e-commerce giant’s cloud business topped RMB10 billion in quarterly revenue for the first time.

The company’s report comes after numerous companies warned about anticipated negative impacts from COVID-19, the disease brought on by the novel coronavirus that is believed to have originated at a food market in Wuhan, China late last year.

Alibaba disclosed on its earnings call that the company is continuing to experience challenges stemming from the outbreak as there’s been a delay in employees’ return to work after the Lunar New Year holiday. This is having a negative impact on the ability for merchants and logistics companies to resume business as usual, Alibaba’s management disclosed.

“Our overall revenue growth rate, we believe, will be negatively impacted for the March quarter,” Chief Financial Officer Maggie Wu said, based on what the company has seen since the start of February. She noted that business units like Alibaba’s China retail marketplace and local consumer services might see negative revenue growth as a result of the disruptions but that it was difficult to give a broad financial projection given that the March quarter is only halfway over.

For context, Alibaba’s China retail marketplace business grew 36% in the latest quarter, before companies started to feel an impact from the coronavirus, while revenue from local services increased 47%. The fact that Alibaba anticipates that there could be negative revenue growth in these categories this quarter “shows the impact of the virus,” Neuberger Berman senior research analyst and tech portfolio manager Hari Srinivasan told MarketWatch.

“There’s demand but when you have large cities and areas that have travel bans, that’s going to have an impact,” Srinivasan said. The issues seem to be largely supply-based, which is encouraging for Alibaba’s long-term prospects, he said, as management cited increasing demand for digital services.

Alibaba “let the leverage from its commerce business flow through,” Neuberger Berman’s Srinivasan said. He had been expecting an increase in investment spending and was impressed that Alibaba’s investments seem to be paying off by allowing the company to benefit from scale in massive markets.

Srinivasan was also encouraged by the company’s momentum in lower-tier Chinese cities as the company pointed out that more than 60% of new average annual customers came from less-developed regions in China. Annual active customers totalled 711 million as of the end of 2019.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 231.82.

The projected lower bound is: 209.86.

The projected closing price is: 220.84.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

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 61.3102. This is not an overbought or oversold reading. 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 54.22. 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 sell 20 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 77. This is not a topping or bottoming area. The last signal was a sell 0 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 5 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -3.950 at 220.360. Volume was 13% above average (neutral) and Bollinger Bands were 6% wider than normal.

Open     High      Low     Close     Volume___
220.370 225.000 219.000 220.360 4,031,018
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 217.79 213.94 182.75
Volatility: 42 33 37
Volume: 3,792,106 3,385,496 3,585,855

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 20.6% above its 200-period moving average and is in an downward trend. Volatility is high 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 bearish on BABA.N and have had this outlook for the last 13 periods.

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