To The Moon

$Alibaba(BABA)$ is scheduled to release its FQ1 2024 report on 10 Aug 2023 (Thursday) before the market open.

Alibaba have been trading volatile prior to its earnings. After experiencing astronomical sales growth during 2020-21 due to a COVID-induced pull forward in demand, Alibaba has struggled for topline growth in recent few quarters.

The impact from China's ongoing economic woes and regulatory crackdown on the tech sector has affected Alibaba's business.

With their management renewed focus on profitability, Alibaba's TTM free cash flow has managed to rebound back up to ~$25B as of FQ4 2023.

Alibaba with its huge and significant market penetration of more than 1 billions users, they would be expected to benefit from China's re-opening and any sort of fiscal stimulus!

What I would be more interested in its latest earnings report would be more improvements in free cash flow generation as the business returns to topline growth (in USD) after four quarters of negative growth rates.

As Alibaba has registered positive revenue growth in local currency (RMB) for the last two quarters, a weaker US dollar and easier compared to FQ1 2023, Alibaba would be expected to beat the earnings estimate.

In this article, I would be sharing the fundamental analysis on some of financial data for Alibaba and also the technical analysis of its most recent stock price movement.

Alibaba (BABA) Earnings Data

I am expecting Alibaba to beat the EPS forecast with higher revenue in Q1 2024 reporting. The main increase in revenue should be coming from its cloud services.

The ecommerce and payment segments might have slowed down due to China economy experiencing a slow growth.

Alibaba (BABA) Earnings History

A better than 2.03 EPS should be possible as Alibaba cloud business should have grow significantly with more enterprise moving into alternative cloud infrastructure providers for redundancy.

There have been also outreach by Alibaba Cloud to penetrate more international market.

Alibaba (BABA) Year-To-Date Earnings

Alibaba has given a more than 2% growth YTD, this might not be as great as other similar Chinese ADRs. But considering that there have been a clampdown on Chinese tech sector companies over the year.

Alibaba has been pretty resilient and able to provide a positive growth.

Alibaba (BABA) Income Statement

What would be more important in the latest earnings would be how its total revenue would look like. If we look at Alibaba Income Statement.

We could expect total revenue to drop due to the slowness and decline in China domestic ecommerce demands.

Alibaba (BABA) Sentiment Analysis

Investors are very positive on Alibaba stock as the portfolios holding have increase by 0.5% in the last 7 days, and similar 4.9% in the last 30 days.

This could be due to the huge and significant market penetration of more than 1 billions users. Investors are expecting Alibaba to benefit from China’s fiscal stimulus on top of its re-opening.

Technical Analysis – Simple Moving Averages (SMA)

SMA does show Alibaba is currently in a bear trend, this might be due to the recent China economy slowness.

Could a better than expected earnings result help to move Alibaba back to bull trend territory?

Technical Analysis – Relative Strength Index (RSI)

RSI momentum looks good and we can see that it is moving towards oversold.

This suggest buying might be building up in anticipation of a better results in its upcoming earnings report.

Technical Analysis – Average Directional Index (ADX)

Alibaba ADX is between 20 and 40 which indicate a developing trend, but +DI is too close to -DI which suggest a rather neutral strength developing.

I will be looking at how Alibaba share price would be trading on 09 Aug 2023 to see if there will be some improvement on +DI.

Technical Analysis – Parabolic SAR (SAR)

Alibaba seem to have a bearish reversal just at the beginning of August, this does not bore well for Alibaba as market is also looking to see if there is more improvement in free cash flow generation.

This is important as Alibaba though have generated positive revenue growth but if US dollar is stronger that would mean a lower free cash flow could be expected.

Summary

Based on what I have observed, Alibaba had beaten EPS estimate for last 2 quarters, but wheat would be more important is positive revenue and focus on profitability.

From the Technicals side, Alibaba stock price seem to be in a bearish trend, this could be due to the impact from China's ongoing economic woes and regulatory crackdown on the tech sector.

I will be monitoring how Alibaba would be trading tonight (09 August 2023) and how market and investors would be responding to its share price.

Appreciate if you could share your thoughts in the comment section whether you think Alibaba is able to overcome the challenges and present a positive renewed focus on profitability?

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.