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Monday, October 25, 2021

Alibaba Group Holding Limited (NYSE:BABA) Defends Accounting Practices

Alibaba Group Holding Limited (NYSE:BABA) Defends Accounting Practices

With the coronavirus pandemic weighing down operations and investments, Alibaba group Holding has reported its first quarterly profit decline since 2016.

Revenue in what Chief financial officer Maggie Wu called “a challenging quarter” rose 22.3% in the quarter to March 31 to 114.31 billion yuan ($16.08 billion) from a year earlier. That was slightly higher than the market consensus of 107 billion yuan, as surveyed by Refinitiv, but represented the slowest growth in at least four years.

The company reported net income of 348 million yuan throughout the same period, a decline of 98.5%. operating income fell 18.6% to 7.13 billion. Alibaba said its profit drop was primarily because of a net loss in its investment income.

Alibaba shares were down 4.4% in morning trading Friday on the new york stock exchange.

During the company’s earnings call, Wu also proactively addressed investors’ concerns over delisting risks, heightened this week by the U.S. Senate’s unanimous passage of a bill that might delist Chinese corporations that aren’t accessible to the public Company Accounting Oversight Board’s audits after a period of three years.

“We are closely watching the developments of this bill,” Wu said.

Investors ought to know that there has been ongoing dialogue between regulators in both countries to permit more information to be passed on to the oversight board, she said.

“Alibaba’s financial statements are prepared in accordance with U.S. GAAP,” the accounting standard adopted by the U.S. Securities and Exchange Commission, and also the company has been for over 20 years audited by global accounting firm PwC, Wu said in her bid to assuage investors.

“The integrity of Alibaba’s financial statements speak for itself,” the executive said.

Alibaba’s first quarter of 2020 saw a weeks-long lockdown in China because of the coronavirus beginning from late January and slashed the value of investments in several affiliated public corporations in which Alibaba holds shares. Most factories were shut down then and transportation was heavily disrupted.

This meant that even though Alibaba’s core business of facilitating online shopper sales continued unimpeded, its ability to deliver on product and services ordered was generally obstructed.

“For Alibaba, any business segment that has a physical touchpoint such as (online marketplace) Taobao.com, food delivery business Ele.me and logistics [arm] Cainiao Networks is expected to have had a flat [performance] compared with last year or most likely contract from last year,” said Bloomberg intelligence analyst Vey-Sern Ling ahead of the quarterly results.

Sales from Alibaba’s commerce business grew 21% in the January-March quarter, versus 54% throughout the same period last year. Its local services business, led by food delivery unit Ele.me, reported quarterly revenue of 4.8 billion yuan, down 8%. Even the group’s cloud computing business experienced a delay as engineers stranded at home couldn’t help clients install and upgrade equipment.

Meanwhile, Alibaba additionally recorded a loss of 7.72 billion yuan from its investment and lending portfolio, compared with a gain of 18.67 billion a year earlier.

Alibaba’s Wu sought to turn investors’ attentions forward from the troublesome quarter in a statement accompanying the results.

“Although the pandemic negatively impacted most of our domestic core commerce businesses beginning in late January, we’ve seen a gradual recovery since March,” she said. the company projects generation of a minimum of 650 billion yuan in revenue for the year to March 2021.

Chief executive Daniel Zhang on the earnings call cited China’s high savings rate as a pointer to the resilience of its consumption power.

Analysts remain positive concerning Alibaba’s outlook too.

“Over time, (the pandemic) has accelerated the structural shift from offline retail to online retail,” Ling said, citing the very fact that a growing number of Chinese families dabbled with e-commerce since the country’s lockdown as they had no alternative but to buy several goods online. In March, about 846 million smartphone users in China browsed on or purchased from Alibaba’s e-commerce platforms, compared with 721 million people a year before.

Price Performance

Relative Valuation

Technical Indicators

Overall, the bias in prices is: Upwards.

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

By the way, prices are vulnerable to a correction towards 204.25.

The projected upper bound is: 229.46.

The projected lower bound is: 200.52.

The projected closing price is: 214.99.


A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

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 94.9102. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 2 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 59.29. 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 95 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 66. This is not a topping or bottoming area. The last signal was a sell 7 period(s) ago.


The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 4 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 7.760 at 214.330. Volume was 16% above average (neutral) and Bollinger Bands were 7% narrower than normal.

Open      High       Low        Close        Volume
207.250   214.570    207.170    214.330      4,910,092
Technical Outlook
Short Term:        Neutral
Intermediate Term: Bearish
Long Term:         Bullish
Moving Averages: 10-period       50-period         200-period
Close:           207.65          200.68            195.37
Volatility:      52              46                42
Volume:          5,631,692       4,015,148         3,666,173

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.


ALIBABA GRP ADR is currently 9.7% above its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 3 periods.

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