News last week that Alibaba (BABA) abandoned plans to list its logistics arm in Hong Kong didn't do anything to lift Alibaba stock out of its downtrend. Alibaba stock looks like it's on sale now, but is BABA stock a buy now?
Alibaba hoped the listing of its Cainiao Smart Logistics Network would raise $1 billion at a minimum. But Alibaba pulled the listing, citing overall weakness in the Hong Kong stock market.
XThe cancellation of the listing poses more challenges to a restructuring plan last year by Alibaba, which would've split the e-commerce giant into six separate companies.
Not that long ago, Alibaba abandoned plans to spin off its cloud computing unit. It also delayed a listing of its Freshippo grocery unit.
In early November 2020, Chinese authorities suspended the $34.5 billion Ant Group IPO in Shanghai and Hong Kong. Ant Group is the fintech arm of Alibaba.
Recent Earnings
BABA stock rallied sharply on Feb. 6 after the company reported fiscal Q3 revenue of $36.7 billion, up 2% from the year-ago quarter and slightly above the $36.16 billion consensus. But adjusted profit fell 4% to $2.67 a a share.
Investors also liked the fact that Alibaba added $25 billion to its share buyback program through March 2027.
Three months earlier, Alibaba stock plunged in mid-November despite reporting an 18% rise in quarterly profit and 6% increase in revenue.
BABA stock surged on Jan. 23 on reports that co-founder Jack Ma and business associate Joe Tsai have been buying shares of BABA stock in recent months.
According to an SEC filing, Tsai purchased $151 million in Alibaba stock in the fourth quarter via his Blue Pool Management family fund. Ma, meanwhile, bought $50 million worth of Alibaba stock. Ma stepped down as the company's chairman in 2019 and remains a big shareholder.
Alibaba came under selling pressure on Sept. 11 after outgoing CEO Daniel Zhang unexpectedly stepped down as head of the company' cloud business.
The company said in June that Zhang was departing as chairman and CEO of the company to focus on Alibaba's cloud intelligence unit. In May, Alibaba announced plans to spin off its cloud business as a separate, publicly traded company.
In December, the company said that CEO Eddie Wu would take over the company's struggling e-commerce business.
Alibaba Stock News
Alibaba stock soared above its 200-day moving average on July 7 after Chinese regulators fined Alibaba's financial arm, Ant Group, just under $1 billion.
Chinese regulators halted Ant Group's IPO in late 2020 for not meeting listing requirements. In April 2021, regulators hit Alibaba with $2.8 billion fine in an anti-monopoly probe. But after three years of regulatory scrutiny, optimism is building that Beijing is close to ending its crackdown on tech firms.
In March 2023, Alibaba announced plans to separate into six separate units.
The company said each business will have the ability raise outside funding and even pursue an IPO. According to report, the company would likely hold on to its cloud/artificial intelligence business and its giant e-commerce operations.
- Cloud Intelligence
- Taobao Tmall Commerce
- Local Services
- Cainiao Smart Logistics
- Global Digital Commerce
- Digital Media and Entertainment
China/U.S. Relations
Sentiment was weak around Chinese stocks in October after the Biden administration announced new restrictions on China's access to U.S. semiconductor technology, including restrictions on the exports of some types of chips used in supercomputing and artificial intelligence. It also imposed tighter rules on the sale of chip equipment to China.
Alibaba stock rallied sharply in late August last year on reports that Beijing and U.S. regulators were close to an audit-inspection deal.
Increased regulatory scrutiny has weighed on Alibaba and other Chinese stocks for the past couple of years. Besides a strict regulatory environment, Chinese stocks have also been dealing with a slowing economy.
In April 2020, China regulators fined Alibaba $2.8 billion after an antimonopoly probe. At the time, it looked like BABA stock was ready to break out of a downtrend. But the stock got turned away at its 50-day moving average. It tried to rally above the 50-day line again in late April but sellers knocked the stock lower again.
Alibaba Stock Fundamental Analysis
The company has a five-year annualized earnings growth rate of 6%, although fundamentals have weakened considerably in recent quarters.
Join IBD experts as they analyze actionable stocks in the coronavirus stock market rally on IBD Live
Alibaba's Composite Rating of 41 (on a scale of 1-99 with 99 being the best) is weak, hurt by soft fundamentals and weak 12-month price performance.
But annual return on equity of 14% helps give Alibaba a respectable SMR Rating (sales + margins + return on equity) of B from IBD Stock Checkup (on an A-to-E scale with A tops).
The Stock Checkup tool quickly identifies group leaders based on a combination of fundamental and technical factors.
Stock Market ETF Strategy And How To Invest
According to Zacks, Alibaba is expected to earn $8.79 a share in its current fiscal year 2024, up 11% compared to fiscal 2023. For fiscal 2025, earnings are expected to decline 3% to $8.50 a share.
Click here to the top-rated stocks in the group.
Alibaba Stock Technical Analysis
Alibaba's relative strength line has been trending sharply lower after several months of underperformance vs. the S&P 500.
A stock's relative strength line, found in daily and weekly charts at Investors.com, compares the stock's daily price performance to the S&P 500. An upward-sloping RS line means the stock is outperforming the S&P 500. A downward-sloping line means the stock is lagging the S&P 500.
Alibaba's Accumulation/Distribution Rating is neutral at C.
BABA Stock: Is It A Buy Now?
Overhead supply issues are still a concern for Alibaba stock with the stock more than 30% off its high.
Alibaba stock gapped above its 50-day line on Nov. 15 and closed near its session high on a strong day overall for Chinese stocks. Normally, it would've been a buy signal but BABA's 200-day moving average at the time around 89.50 was a potential resistance level to watch.
Alibaba stock has struggled to make progress after climbing off lows in January. BABA stock is below its 50-day line, which is still a potential resistance level to watch.
With sellers dictating the action since early August, Alibaba stock is not a buy.
For Alibaba to full break out of its downtrend and give a true buy signal, it'll need to reclaim the 80 level as well as its 200-day line, currently around 82.
Follow Ken Shreve on Twitter at @IBD_KShreve for more market insight and analysis right now.
YOU MIGHT ALSO LIKE:
Best China Stocks To Buy And Watch
Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
IBD Digital: Unlock IBD's Premium Stock Lists, Tools And Analysis Today
