Alibaba (BABA) has seen a strong move above its 50-day moving average on Wednesday, following the positive earnings report from Chinese internet giant JD.com (JD). With positive sentiment surrounding Chinese stocks, is BABA a buy? The company is set to report quarterly results Thursday before the open, with adjusted profit expected to rise 16% year over year to $2.11 a share, and revenue up 6.5% to $31 billion. Recent news on BABA includes the departure of CEO Daniel Zhang from Alibaba’s cloud business, as well as plans to spin off its cloud business as a separate, publicly traded company.
Earlier, on August 10, sentiment was positive around Alibaba stock following its earnings report, as adjusted profit increased 37% to $2.40 a share, and revenue increased 5% to $32.3 billion. However, the stock saw a decline in mid-May due to its fourth straight quarter of declining revenue.
On April 12, Alibaba stock plunged after news of Japanese conglomerate Softbank selling most of its stake in the company, and on April 11, the company launched its own generative AI system. Despite these setbacks, optimism is building that Beijing is close to ending its crackdown on tech firms.
Regulatory fears for Chinese stocks like Alibaba have been abating, with the U.S. administration announcing new restrictions on China’s access to U.S. semiconductor technology. However, last year, Alibaba stock rallied sharply on reports that Beijing and U.S. regulators were close to an audit-inspection deal.
The company’s fundamental analysis shows a five-year annualized earnings growth rate of 11%, while its Composite Rating has fallen. On the technical side, Alibaba’s relative strength line has been trending after several months of underperformance vs. the S&P 500.
Given these various factors, it’s important to consider the potential impact on Alibaba stock, and whether it presents a buying opportunity, as the company continues to navigate through various challenges and opportunities.
