Alibaba’s share price: what to expect from now on?

$Alibaba(BABA)$ $Alibaba(BABA)$ $Alibaba(09988)$

Find out what to expect from Alibaba’s earnings results, how they will affect the Alibaba share price, and how to trade Alibaba’s earnings.

Alibaba Group Holding Limited (BABA)

$Alibaba(BABA)$ started surging after the People’s Bank of China (PBOC) said it would “step up the prudent monetary policy’s support to the real economy, especially for industries and small businesses hit hard by the pandemic,” Bloomberg reported.

But Alibaba stock remains deep in the red, down almost 30% this year after losing some 50% of its market value in 2021 amid pressure from regulatory crackdowns. The shares are trading around their lowest levels since 2016, set to open around $85 on Tuesday after bottoming out at $76 last month. Can we still expect from Alibaba’s earnings results?

Alibaba share price: Forecasts

Hopes are that the internet commerce company can best estimates that have been revised lower.

It has had more to deal with from external fundamentals as of late, whether it was domestic regulatory woes, thereafter delisting fears in the US, lockdowns that have hurt domestic demand sending the latest retail sales reading into contraction (-3.5% year-on-year) and resulting in a general risk-off mood for key Chinese indices, and central bank easing plans that have generally missed hopes of more and/or larger rate cuts.

Overall, Alibaba has still been enjoying decent revenue growth rates even if bested by Amazon at times. Its share price is always seen as a discount with the spread remaining wide between the two and a clear disadvantage for Alibaba. The Chinese e-commerce giant’s share price at these levels continues to enjoy a more favourable forward price-to-earnings (P/E) ratio that’s roughly a fifth of Amazon’s.

When it comes to expectations of what the earnings per share (EPS) reading will be, average hopes have been dropping over the past few months to $1.15, less than half its previous quarter’s $2.65. Revenue growth slowed in its fourth-quarter 2021 release back in February and missed estimates, this time around lowered to about $30.5bn.

Alibaba upped its share buyback scheme to $25bn last month and pushed out the expiration date to 2024. This leaves investors noting the usual updates on whether the number of active users has reached its target and whether customer management revenue, expansion plans in doubt on any potential negative government reaction, cloud revenue and income despite the regulatory crackdown and amidst reports of a reshuffle.

Recommendations haven’t worsened despite the onslaught in its share price with a clear majority buy rating amongst them where the number of those opting for a ‘hold’ dissipates in favour of buy and strong buy recommendations. That means the average price target amongst them remains high, roughly double its current share price.

 Weekly technical overview and trading strategies

While it may not have always held and has required some revision, its bear trend channel has been a lengthy one from the start of last year, with all its gains made since 2016 undone in the process.

That has kept its technicals in the longer-term weekly time frame largely in the red, with prices beneath all its main moving averages, at times walking the lower end of the band, with a wide margin between the DI+ and DI- for its DMI (Directional Movement Index), and an ADX (Average Directional Movement Index) reading well in trending territory.

The story has been similar but a bit choppier when zooming into the daily time frame, and a technical overview for both that’s a stalling bear trend given traders are noting the bounces off the lower end of the band and channel that at times can offer short-lived upside momentum, otherwise sell strategies winning out even when initiated from the Relative Starting Point.

Fundamental figures like earnings for a company tend to render technicals of little use, and external fundamental factors like the ones mentioned earlier are also items to note on an intraday basis.

Alibaba weekly chart with key technical indicator

99% extreme buy bias in mid-April amongst retail traders, and since then they’ve little changed with the latest reading at 98% long, a staggeringly high level for sentiment amongst them. Furthermore, given where prices are currently residing at, it signifies the bulk – if not all – of these longs were likely to have been initiated at higher prices.

As for the exchange (American Depository), short interest has been dropping, the latest reading showing 37.8m shares shorted dropping from nearly 45m recently and representing over 1.4% of total shares floated.

IG Client sentiment* and short interest for Alibaba shares

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of the start of the week for the outer circle. Inner circle client sentiment taken from April 18th, 2022.