Alibaba Group Holding Limited (NYSE:BABA) showing rapid decline in losses from its digital media segment

Alibaba Group Holding Limited (NYSE:BABA) showing rapid decline in losses from its digital media segment

Alibaba Group Holding Limited (NYSE:BABA) showing rapid decline in losses from its digital media segment

When is a money-losing segment not a concern for a company? When it brings something else to the table. Alibaba (NYSE:BABA) has reported single-digit revenue growth in its digital media segment in the latest quarter. The digital media segment had revenue of RMB 6.3 billion compared to RMB 5.97 billion in the year-ago quarter. This equals to 6% growth in that segment, which was the slowest among all Alibaba stock’s parts.

However, Alibaba also reported a steep reduction of 30% in EBITA loss from this segment. Improvement in margins in this segment should increase the overall EPS and boost the sentiment towards Alibaba stock.

Alibaba is rationalizing cost to improve the impact of digital media on subscriber growth. Despite modest revenue growth, Alibaba’s Youku saw a 40% year-over-year increase in average daily subscribers. The increase in subscribers and falling EBITA loss shows that Alibaba is able to improve its strategy in this segment to gain the maximum benefit. Digital Media segment brings customers to Alibaba’s platform which can be monetized through other services. Hence, even at a loss, this segment is vital for the future growth of Alibaba.

Alibaba’s digital media is the biggest loss-making segment for the company. However, this segment showed a sharp decline in EBITA loss in the recent quarter as the company tried to rationalize cost and focused on return on investment. The revenue growth was a mere 6% in this segment, but the average daily active subscribers increased by 40%, which is more than the YoY growth reported by Tencent Video.

The digital media segment helps in improving the attraction of Alibaba’s ecosystem. The company can also monetize digital media customers through other services and the e-commerce platform. If you’re thinking about investing, focus on the subscriber growth. This will show the retention ability of Alibaba compared to other competitors and increase the growth runway for BABA stock.

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 180.26.

The projected lower bound is: 158.33.

The projected closing price is: 169.30.

Candlesticks

A white body occurred (because prices closed higher 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 21 white candles and 29 black candles for a net of 8 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 29.3029. This is not an overbought or oversold reading. The last signal was a buy 1 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 45.98. 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 -77. This is not a topping or bottoming area. The last signal was a buy 0 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 7 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 3.710 at 169.480. Volume was 50% below average (consolidating) and Bollinger Bands were 15% narrower than normal.

Open     High      Low     Close     Volume___
166.580 170.170 165.100 169.480 1,669,139
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 171.63 171.23 169.30
Volatility: 47 41 38
Volume: 3,638,264 2,912,107 3,370,898

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 0.1% above its 200-period moving average and is in an downward trend. Volatility is 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 3 periods.

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