Alibaba Group Holding Limited (NYSE:BABA) lowered its full-year estimates due to current macroeconomic conditions

Alibaba Group Holding Limited (NYSE:BABA) lowered its full-year estimates due to current macroeconomic conditions

Alibaba Group Holding Limited (NYSE:BABA) lowered its full-year estimates due to current macroeconomic conditions

Alibaba‘s (NYSE:BABA) annual Singles Day sales extravaganza on Nov. 11 saw a slowdown in growth despite hitting a record $30.8 billion in gross merchandise volume (GMV). Sales for the event grew 27% year-over-year in yuan terms, considerably less than the 39% growth it saw in the previous year. In fact, this was the slowest growth rate for Singles Day sales in the decade that the company has been promoting the event. This news came in the same month that the company reported that it was lowering its full-year revenue forecast to account for macroeconomic uncertainties. 

This leaves Alibaba investors wondering how worried they should be about the Chinese economy’s setback. Let’s take a closer look. 

The bad news about Alibaba and the Chinese economy

In the past six months, Alibaba shares have fallen about 25%, as investors question how current macroeconomic conditions will affect Alibaba’s business. Right now, the country is embroiled in a trade war with the U.S., its stock market has had a meltdown, and its economy grew at its slowest pace since 2009 last quarter.

Alibaba has not been immune. On Nov. 2, it reported quarterly revenue of $12.4 billion, which fell short of estimates. This was surprising because the company has made a habit of blowing estimates out of the water. In the same report, Alibaba lowered its revenue forecast by 4% to 6% in yuan terms for the financial year that ends in March. 

The downward revision of its revenue outlook reflects a decision “not to monetize, in the near term, incremental inventory generated from growing users and engagement on our China retail marketplaces.” The company says this will benefit its merchants in the current challenging economic environment. It’s nice to see a big company supporting the small-to-medium enterprises on its marketplace. But of course, Alibaba has a vested interest in keeping merchants happy on its platform.

The good news about Alibaba and the Chinese economy

Middle-class shoppers in China may not be buying as many larger items, but Alibaba says that’s simply because their spending habits have changed. On its own China retail platforms, Alibaba says it has seen robust growth in sales of smaller items, such as consumer staples, cosmetics, and apparel.

Another positive sign for Alibaba is that while China’s economic report showed that online sales of goods were up 24% for the past quarter, Alibaba’s own physical-goods GMV was up an impressive 30% from the year-ago period. Alibaba said this is a sign that it’s still gaining market share in China.  

Overall, the bias in prices is: Downwards

The projected upper bound is: 164.24.

The projected lower bound is: 138.34.

The projected closing price is: 151.29.

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 23 white candles and 27 black candles for a net of 4 black 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 24.9721. This is not an overbought or oversold reading. The last signal was a buy 0 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 48.21. 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 41 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 -46. This is not a topping or bottoming area. The last signal was a sell 5 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 sell 2 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -0.330 at 151.500. Volume was 26% below average (neutral) and Bollinger Bands were 22% narrower than normal.

Open High Low Close Volume___
155.000 156.110 151.430 151.500 3,752,605

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 156.22 149.56 175.67
Volatility: 36 56 43
Volume: 5,962,947 5,041,099 4,287,674

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 13.8% below its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. 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 18 periods.

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