Alibaba Group Holding Limited (NYSE:BABA) Digital Media segment continues to show rapid improvement

Alibaba Group Holding Limited (NYSE:BABA) Digital Media segment continues to show rapid improvement

Alibaba Group Holding Limited (NYSE:BABA) Digital Media segment continues to show rapid improvement

Alibaba (NYSE:BABA) has been boasting rapid growth in paying subscribers for its Youku platform. In the latest quarter, the company mentioned that Youku’s average paying subscribers grew 47% year-on-year. This helped Alibaba show 23% YoY growth in the Digital Media segment.

At the same time, there has been a narrowing of losses within the Digital Media segment. This trend should improve the bullish sentiment for Alibaba stock.

In the year-ago quarter, Alibaba reported 3.8 billion  yuan EBITA losses for the Digital Media segment. In the recent quarter, this loss came down to 2.2 billion yuan, or $309 million.

There has also been an improvement in EBITA margin. It increased from negative 64% in the year-ago quarter to negative 30% in the latest quarter. At this pace, Alibaba should be able to break even in this segment in 2020. Digital Media is the biggest loss-making segment within Alibaba. Rapid reduction in losses in this segment should help in boosting the overall margins, EPS and improving the momentum for Alibaba stock.

Improvement in Digital Media Metrics

Alibaba’s online streaming platform, Youku, has reported 47% year-on-year growth in paying subscribers. This growth has also fueled the revenue growth of 23% within Digital Media segment. In the latest quarter, the revenue base in this segment increased to 7.3 billion yuan or $1.02 billion. 

There has been a massive reduction in EBITA losses within the Digital Media segment. One of the main reasons is that the management is focusing more on return on investment and ensuring cost efficiencies. This has helped in reducing the quarterly losses from RMB 3.8 billion in the year-ago quarter to RMB 2.2 billion. 

Investor Takeaway

Alibaba’s Digital Media segment continues to show rapid improvement in a number of important metrics. Youku has posted 47% YoY growth in paying subscribers, compared to 22% growth reported by Tencent Video. Youku should be close to 100 million mark in terms of paying subscribers and is one of the top three OTT players in China. 

Alibaba has also mentioned about the massive decrease in losses in the Digital Media segment. Lower losses and good revenue growth should allow this segment to show positive EBITA by end of 2020. Youku also helps in increasing the overall user time spent on Alibaba’s platform. These users can be monetized using different services like retail, delivery, Alipay, and others.

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 184.59.

The projected upper bound is: 214.74.

The projected lower bound is: 196.49.

The projected closing price is: 205.62.

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 26 white candles and 23 black candles for a net of 3 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 83.9800. 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 69.04. 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 9 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 119.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 12 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 0.410 at 204.910. Volume was 5% above average (neutral) and Bollinger Bands were 32% wider than normal.

Open     High      Low     Close     Volume___
206.000 207.100 203.790 204.910 3,421,218
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 200.01 183.50 175.78
Volatility: 29 32 36
Volume: 3,754,161 3,708,629 3,438,834

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 16.6% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into BABA.N (bullish). Our trend forecasting oscillators are currently bullish on BABA.N and have had this outlook for the last 32 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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