When will things finally start to turn around for Alibaba? That's the question we'll be discussing in today's video. Whether you like it or not, one key factor in the success of this stock is the relationship between the US and China. We'll also discuss the general economy within China, which has been a significant concern for investors due to its recent weakness. Additionally, we'll look at Alibaba's upcoming earnings announcement, set for a few weeks from now. We'll review analyst expectations, what we can anticipate from Alibaba's numbers, and what to watch for in this earnings announcement that could potentially boost the stock.
Alibaba's 52-week high was back in October when the stock price reached around $117 per share, driven by stimulus announcements in China. However, the stock has since fallen by over 25%. Over the last five years, the stock is down by almost 60%, and from its all-time high in October 2020, it has dropped around 70%. Several factors have contributed to this decline, including the Chinese government's crackdown on tech businesses, potential delisting from US stock markets, and recent economic weakness in China.
Despite these challenges, there is more optimism around the Chinese economy today, driven by recent stimulus measures. The Chinese stock market is up around 23% over the past year, and the economy grew by 5.4% in the fourth quarter of last year, beating market expectations. This growth trend is expected to continue, supported by a five-year, $1.4 trillion stimulus package announced in late September.
However, potential trade tensions with the US and other economic issues in China, such as high youth unemployment and a deflationary environment, could impact Alibaba's performance. Analysts expect Alibaba to announce earnings on February 5th, with EPS estimates ranging from $2.39 to $3.15 and revenue estimates around $38.3 billion, representing 7% year-over-year growth.
Investors will be closely watching Alibaba's EPS numbers and guidance on the Chinese economy. Alibaba is currently trading at a rock-bottom valuation, with a forward P/E ratio of 8.87, compared to 22 for the US S&P 500 and 25 for the NASDAQ. If Alibaba's valuation aligns more closely with US companies, it could see significant upside.
Free Cash Flow
As of the latest available data, Alibaba's free cash flow for the quarter ending September 30, 2024, was approximately $9.48 billion. For the twelve months ending September 30, 2024, Alibaba's free cash flow was around $20.90 billion.
Technical Analysis
As of the latest data, here are the key support and resistance levels for Alibaba (BABA) stock:
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Support Levels: First Support Level (S1): Around $81.70 Second Support Level (S2): Approximately $78.50
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Resistance Levels: First Resistance Level (R1): Around $88.00 Second Resistance Level (R2): Approximately $92.00.
These levels can act as barriers that the stock price must breach or hold above, providing potential entry or exit points for traders.
Market Sentiment
The current market sentiment for Alibaba (BABA) is mixed. As of today, Alibaba's stock price is around $85.19, down 1.4%. The stock has experienced significant volatility, influenced by various factors including economic conditions in China and geopolitical tensions between the US and China.
Recently, investor sentiment has shown some improvement due to fiscal and monetary policy initiatives in China aimed at economic revival. However, concerns about regulatory actions, potential delisting from US stock markets, and overall economic weakness in China continue to weigh on the stock.
Conclusion
In conclusion, while there are risks associated with investing in Alibaba, the current valuation presents a potential opportunity. As always, do your own research and ensure any investment aligns with your risk tolerance and time horizon. Thank you for your continued support, and if you enjoyed this article, please like and subscribe for more content. Have a wonderful day!
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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