Alibaba Group Holding Limited (NYSE:BABA) financial results are being discounted by the trade war
Alibaba’s financial results are being discounted by the trade war. Its growth has slowed, down from 50% per year. China’s consumers are feeling a pinch. The fall of the yuan means its success is worth less when translated to U.S. currency.
Despite those headlines, the Alibaba stock investment thesis remains intact. Cloud computing revenue at Alibaba is growing at 66% per year. Unlike American cloud companies, including Microsoft (NASDAQ:MSFT), Alibaba is selling a complete suite of financial applications, not just a platform. In that way its cloud is more comparable to that of Salesforce (NASDAQ:CRM), which sells at 9 times revenue, and brings just 7% of that to the net income line.
Alibaba’s cloud is less mature than that of Amazon (NASDAQ:AMZN), which now gets over 11% of revenue from Amazon Web Services. The comparable figure for Alibaba’s cloud is 6.7%. Yet Alibaba’s cloud market share in the Asia-Pacific region now exceeds that of Amazon. That includes Japan and Southeast Asia. Alibaba has held this lead for two years.
After focusing on “new retail” for several years, buying malls and grocery stores, Alibaba is now refocusing on its cloud. CEO Daniel Zhang said last November cloud will be Alibaba’s “main business.” The company now hosts two data centers in Europe, and two in the U.S.
While American politicians are promising to “break up” big tech companies like Amazon and Facebook, the Chinese government is cheering Alibaba’s dominance and intrusive technology.
Alibaba’s headquarters sports facial recognition door access, robot cars making deliveries and a hotel with automated guest check-in. None of this would be possible under American law because of privacy or antitrust concerns.
Alibaba can deliver its technology throughout the world’s second-largest economy through its network of retail stores. Its retailing lead over Amazon is immense. Its Alipay payment system, based on mobile phones, delivers revenue without the discounts charged by Visa (NASDAQ:V) and MasterCard (NYSE:MA).
In areas like artificial intelligence and robotics, China’s authoritarian policies give Alibaba an advantage. Alibaba can freely leverage its size advantages and technology prowess across the country. These systems can then be deployed to any economy whose government accepts them.
The Bottom Line on Alibaba Stock
Strip out the politics, strip out the rhetoric, and Alibaba is the most innovative company on the planet. Its government, and home market, are fully supportive of what it’s doing, and it is expanding rapidly in the fastest-growing markets on the planet.
It’s a core holding, period. It will be a core holding, and a key challenger to America’s “Cloud Czars,” throughout the next decade.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 177.23.
The projected lower bound is: 154.63.
The projected closing price is: 165.93.
During the past 10 bars, there have been 3 white candles and 6 black candles for a net of 3 black candles. During the past 50 bars, there have been 21 white candles and 28 black candles for a net of 7 black candles.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 25.6049. This is not an overbought or oversold reading. The last signal was a buy 6 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 43.90. 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 46 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 -57. This is not a topping or bottoming area. The last signal was a buy 1 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 12 period(s) ago.
Rex Takasugi – TD Profile
ALIBABA GRP ADR closed up 0.880 at 166.070. Volume was 30% below average (neutral) and Bollinger Bands were 8% wider than normal.
Open High Low Close Volume___
166.070 168.510 164.090 166.070 2,263,995
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 166.55 170.26 170.08
Volatility: 44 43 38
Volume: 2,653,824 2,780,457 3,290,658
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 2.4% below 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 8 periods.