Alibaba Group Holding Limited (NYSE:BABA) looks significantly undervalued at current levels
Let’s be fair to Alibaba (NYSE:BABA). Shares o the Chinese eCommerce giant giant are up about 26.20% year-to-date and that’s nothing to scoff at. That puts Alibaba stock ahead of U.S.-based rival Amazon by nearly 1,100 basis points.
With Trade Tensions Thawing, Alibaba Stock Can Be Awesome Again
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Add to that, based on traditional earnings metrics, Alibaba is the less expensive of the two stocks.
Though Alibaba’s current U.S. footprint can best be described as small but growing, the shares have been hamstrung by the ongoing trade row between the U.S. and China. Alibaba stock, as of Friday Oct. 11, resides more than 11% below its 52-week high with a nasty June tumble accounting for most of that loss.
Fortunately, since the June lows, Alibaba has made a series of higher highs and higher lows, indicating a return to old highs and beyond is possible. In positive, broad fundamental news, Alibaba jumped 4.14% last Friday on volume that was more than 25% above the daily average amid headlines that the world’s two largest economies are finally making positive headway on what has been a strained trade relationship.
Speaking of positive fundamentals, not only are Chinese retail sales growing, indicating the world’s second-largest economy is doing an admirable job of turning toward domestic consumption, but e-commerce there is booming and that’s long been one of the primary catalysts for BABA stock.
Online sales there are expected to swell 30% this year to $1.989 trillion, according to eMarketer.
“By the end of this year, China will have 55.8% of all online retail sales globally, with that figure expected to exceed 63% by 2022,” said the research firm. “Alibaba will lead ecommerce sales in China with a 53.3% share.”
Bottom Line: Alibaba Stock Is a Winner
Like Amazon does in the U.S., Alibaba faces competition in its core eCommerce market and it’s reasonable to expect the company will cede some market share in online retail in the years ahead. However, the company’s diversified revenue streams, impressive margins and high penetration rates should continue supporting Alibaba.
“Alibaba’s marketplace monetization rates have generally been on an upward trend despite recent macro uncertainty, indicating that sellers are increasingly engaging with Alibaba’s marketplaces and payment solutions,” said Morningstar in a note out earlier this month. “Retail revenue per active user continues to outpace other China rivals, owing in part to an emphasis on higher-quality merchants.”
Pinpointing exactly when Alibaba stock makes its next epic move is difficult, but at current levels, it’s not a stretch to say the stock is undervalued by 30% to 40%.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 182.43.
The projected lower bound is: 160.29.
The projected closing price is: 171.36.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 5 black candles for a net of 1 black candles. During the past 50 bars, there have been 22 white candles and 27 black candles for a net of 5 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 67.9006. This is not an overbought or oversold reading. The last signal was a buy 8 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 50.52. 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 48 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 65. This is not a topping or bottoming area. The last signal was a buy 3 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 buy 0 period(s) ago.
Rex Takasugi – TD Profile
ALIBABA GRP ADR closed down -1.780 at 171.160. Volume was 53% below average (consolidating) and Bollinger Bands were 4% wider than normal.
Open High Low Close Volume___
172.900 173.320 170.930 171.160 1,509,352
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 167.63 170.61 170.42
Volatility: 40 42 38
Volume: 2,326,781 2,708,329 3,288,096
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 0.4% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. 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 10 periods.
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