Alibaba Group Holding Limited (NYSE:BABA) stock will likely be volatile in the short run after it reports Q3 earnings later this week

Alibaba Group Holding Limited (NYSE:BABA) stock will likely be volatile in the short run after it reports Q3 earnings later this week

Alibaba Group Holding Limited (NYSE:BABA) stock will likely be volatile in the short run after it reports Q3 earnings later this week

Alibaba (NYSE:BABA) will next report earnings on Feb. 13 before market open. A month earlier, on Jan. 13, BABA stock hit an all-time high of $231.14. Many investors are now wondering if the Chinese e-commerce giant will be able to deliver robust results that could push the share price to new highs.

During this earnings season, I expect to see volatile price action with a potential downward bias in Alibaba stock, especially amid the current coronavirus outbreak that is making headlines globally. However, as China’s move to a consumption-based economy is here to stay, long-term investors may want to consider investing in BABA stock, especially if there is a dip in price in the coming weeks.

What to Expect from BABA Stock’s Earnings

When Alibaba reported second-quarter results in November 2019, it beat revenue expectations, thanks to strong growth in its e-commerce and cloud computing businesses. Revenues grew 40% year-over-year. Similarly, non-GAAP earnings per share of $1.83 translated into a 36% increase year-over-year.

The company reports revenue in four segments:

  • Core Commerce (largest segment as it accounts for 85% of its top line)
  • Cloud Computing (revenue grew by an impressive 64% year-over-year)
  • Digital Media and Entertainment
  • Innovation Initiatives

In Q2, annual active consumers reached 693 million, a quarterly increase of 19 million from the 12-month period ended June 30, 2019. Similarly, mobile monthly active users reached 785 million in September 2019, a quarterly increase of 30 million.

Therefore, when Q3 numbers come out, analysts will want to see the growth in user numbers continue.

Another important metric to pay attention to is Alibaba’s operating margin, which stands at about 17%. Over the years, BABA’s high operating margin has contributed to the profitability of Alibaba stock.

However, because of the coronavirus infection, Chinese New Year celebrations were curtailed, leading to a possible decrease in consumer spending. So the Street will be keen to see any relevant trading update from management.

The Bottom Line on Alibaba Stock

Alibaba has become a highly regarded global company, and BABA stock offers U.S. investors the chance to invest in the growing Chinese consumer and e-commerce markets.

Well-performing stocks tend to repeat their robust performances. In Alibaba’s case, its strong cash flow from the core marketplace operations as well as the growth in cloud computing will likely be the main catalysts driving the stock price to new highs in this decade.

Long-term investors should view any further fall in the BABA stock price as an opportunity to buy the stock. However, traders with a short-term horizon should realize that Alibaba stock may be volatile in the short run.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 228.14.

The projected lower bound is: 206.94.

The projected closing price is: 217.54.

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 29 white candles and 21 black candles for a net of 8 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 33.8777. This is not an overbought or oversold reading. The last signal was a sell 3 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 51.96. 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 18 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 45. This is not a topping or bottoming area. 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 1.440 at 217.210. Volume was 11% above average (neutral) and Bollinger Bands were 13% wider than normal.

Open     High      Low     Close     Volume___
219.840 220.010 215.300 217.210 3,880,287
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 215.38 212.97 182.39
Volatility: 38 32 36
Volume: 3,544,885 3,400,690 3,571,373

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 19.1% above 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 11 periods.

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