Alibaba Group Holding Limited (NYSE:BABA) in the age of COVID-19

Alibaba Group Holding Limited (NYSE:BABA) in the age of COVID-19

Alibaba Group Holding Limited (NYSE:BABA) in the age of COVID-19

The COVID-19 outbreak put a damper on Alibaba Group Holding Ltd.’s fast growth, and challenges are expected to continue even if China has managed to better control its coronavirus situation.

The e-commerce giant warned of a “negative impact” to its business because fewer people were available to produce goods and deliver packages to customers’ doorsteps when Chinese cities went into lockdown after the Lunar New Year holiday. While supply issues seem to have eased, there are now questions about how consumer demand for e-commerce products is holding up amid a period of global economic uncertainty and continued unease about germ spread.

“[W]e believe the company will remain materially exposed to a global-scale recession,” RBC Capital Markets analyst Mark Mahaney wrote in mid-March, as the company’s commerce segment is a key contributor to overall revenue.

Alibaba’s BABA, +2.67% management team appears upbeat that the company will emerge from the crisis in a stronger position than ever, though. The SARS epidemic in the early 2000s helped Chinese consumers become accustomed to making online purchases, and the hope is that the COVID-19 pandemic will usher in even more digital adoption, including online grocery services and remote-working tools.

What the numbers are saying

Revenue: Though Alibaba executives didn’t give numerical forecasts on the company’s last earnings call in February, the tone of their commentary prompted analysts to bring down their estimates for the March period.

Analysts surveyed by FactSet modeled RMB107.7 billion ($15.2 billion) in revenue for Alibaba’s fiscal fourth quarter as of the end of March, about in line with what they were projecting at the end of February but down from the RMB126.2 billion modeled at the end of January. Estimates for the full calendar year dropped to RMB472.6 billion from RMB483.5 billion.

Earnings: Estimates for March-quarter earnings per share fell to RMB6.68 in late March from RMB9.75 in late January. For the full calendar year, they declined to RMB47.30 from RMB47.73.

Stock movement: Alibaba shares dropped 8.3% during the quarter, as the KraneShares CSI China Internet ETF KWEB, +2.75% fell 7%. The S&P 500 SPX, +3.05% lost 20% over that span.

Analysts remain overwhelmingly upbeat about the name: 56 of those surveyed by FactSet rate the stock a buy, and one other rates it a hold, with an average price target of $258.53 as of April 14.

What the company is saying

Feb. 13: Alibaba’s management disclosed on an earnings call that the company saw a “negative impact on our commerce business” in the two weeks after the Lunar New Year holiday ended, as “demand for goods and services is there” but many packages weren’t able to be delivered on time. Based on what the company saw during the first 13 days of February, it expects that overall revenue growth will be “negatively impacted,” while some businesses like local consumer services and Chinese retail marketplaces could see negative revenue growth.

Negative growth in the China retail marketplace business would mark a sharp reversal for a segment that grew 36% in the December period.

Feb. 10: Alibaba announced it would provide free services to Chinese businesses as they dealt with the COVID-19 outbreak. The company reduced or waived some platform fees, provided subsidies to delivery workers, and offered free use of its Dingtalk work-from-home services.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 221.72.

The projected lower bound is: 187.77.

The projected closing price is: 204.74.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 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).

A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 8 rising windows in the last 50 candles–this makes the current rising window even more bullish.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

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 73.8289. This is not an overbought or oversold reading. The last signal was a sell 9 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 58.24. 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 61 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 192.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 2 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 5.340 at 204.780. Volume was 5% above average (neutral) and Bollinger Bands were 1% wider than normal.

Open     High      Low     Close     Volume___
205.000 207.970 204.260 204.780 4,041,967
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 194.91 202.14 189.36
Volatility: 42 55 41
Volume: 3,425,487 4,314,576 3,533,756

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 up today (bullish) 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 8.1% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume into BABA.N (mildly bullish). Our trend forecasting oscillators are currently bullish on BABA.N and have had this outlook for the last 3 periods.

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