Alibaba Group Holding Limited (NYSE:BABA) New Deal with Russia will boost stock

Alibaba Group Holding Limited (NYSE:BABA) New Deal with Russia will boost stock

Alibaba Group Holding Limited (NYSE:BABA) New Deal with Russia will boost stock

Back in September, Alibaba (NYSE: BABA ) announced a joint venture in Russia called AliExpress Russia JV. It now is a done deal. The question is how it might affect Alibaba stock.

So let’s take a look at the details: The company, along with the Russia sovereign wealth fund (RDIF), each agreed to invest $100 million and MegaFon (Russia’s second largest mobile operator) will sell its 9.97% equity stake in Mail.RU to Alibaba for a 24.3% in the JV.

Then Mail.ru will transfer its Pandao ecommerce business and $182 million for a 15% position. By doing this, the JV will have sufficient cash resources but also access to key technology assets and distribution, with access to about 77 million subscribers.

Here’s what the CEO of Alibaba, Daniel Zhang , said about the deal:

“This partnership will enable the AliExpress Russia JV to accelerate the development of the digital consumer economy of Russia and CIS countries in ways that no one party could accomplish alone. Together, we are uniquely positioned to offer consumers in Russia and neighbouring countries an innovative shopping experience by combining social platforms with commerce, as well as enabling regional brands and SMEs to sell their products locally and globally. Alibaba’s mission is to make it easy to do business anywhere. This JV is an important part of Alibaba’s international expansion and step toward our goal of supporting 10 million small businesses reach profitability and serving 2 billion consumers around the world.”

It’s true that Russia can be a risky market. Let’s face it, the government has a history of periodic interventions, which have resulted in losses for foreign partners. Just look at the challenges that companies like Exxon Mobil (NYSE: XOM ) and BP (NYSE: BP ) have had to deal with.

But then again, China is a tough market to navigate as well. And for the most part, Alibaba has thrived.

Interestingly enough, the U.S.-China tensions may push China toward different alliances, such as with Russia. This would certainly make it more amenable for arrangements like AliExpress Russia JV.

Something else to consider: It will get tough for BABA to keep up the growth in its ecommerce segment in the years ahead. While China still has lots of upside, this will likely come from smaller cities, which could be more difficult to monetize. In other words, BABA has little choice but to look at global expansion, even in riskier countries.

Bottom Line on Alibaba Stock

In the meantime, Alibaba’s business is running on all cylinders. For the fiscal year ended March 31, revenues soared by 51% to $56.2 billion and net cash flows came to a hefty $22.5 billion.

Although, this should not be much of a surprise as the company has a dominant platform. Note that the retail marketplaces have 654 million annual active consumers and there are 721 Mobile MAUs (Monthly Active Users).

But of course, Alibaba stock is more than just about ecommerce. The cloud business, for example, continues to see much traction. During the latest quarter, the revenues for this segment jumped by 76% to $1.15 billion. In fact, BABA is the clear leader in the Chinese market. And as seen with Amazon.com (NASDAQ: AMZN ), the cloud business can produce juicy margins.

Alibaba stock is also trading at an attractive valuation, with the forward price-to-earnings multiple of about 24X, which is at a steep discount to the growth rate. It is also cheaper on a relative basis to other Chinese ecommerce operators, like JD.com (NYSE: JD ), that is trading at 28X and is growing at a slower pace.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 165.83.

The projected upper bound is: 172.53.

The projected lower bound is: 151.98.

The projected closing price is: 162.25.

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 24 black candles for a net of 2 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 80.5882. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 5 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 49.44. 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 5 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 181.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 6 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 3 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 2.800 at 162.650. Volume was 16% above average (neutral) and Bollinger Bands were 50% wider than normal.

Open High Low Close Volume___
164.000 165.680 161.970 162.650 3,837,126

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

Moving Averages: 10-period 50-period 200-period
Close: 153.68 174.49 163.13
Volatility: 34 38 44
Volume: 4,267,918 3,859,674 4,034,436

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 0.3% 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 22 periods.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.

You must be logged in to post comments :  
CONNECT WITH