Alibaba stock price has stalled this month as the recent surge faded. BABA dropped to $132.45 on Monday, down by 11% from its highest point this year, meaning that it has moved into a technical correction. This article explores the technical and fundamental reasons why the BABA stock may be on the cusp of a strong surge.
Alibaba stock price has strong technicals
The first main reason why the BABA stock price will likely surge is that it has strong technicals. The daily chart shows that the BABA stock bottomed at $65.50 in 2024 and then surged to a high of $148.15.
It has moved above the 50-day and 100-day moving averages, a sign that the uptrend is still strong. Most importantly, there are signs that the Alibaba share price is slowly forming a bullish flag pattern. This pattern comprises a vertical line and a rectangle consolidation pattern, which is now happening.
Alibaba stock price has also been in an Elliot Wave pattern. It has completed the first three waves, and is currently in the fourth one, which is usually a bearish one. This means that it will soon move to the fifth wave, which is usually characterized by more upsides.
Therefore, a combination of a bullish flag pattern, strong moving averages, and Elliot Wave is a sign that the stock will have a strong bull run later this year. More bullish signs will be confirmed if the stock surges above the key resistance point at $148. A move above that level will boost the odds of the Alibaba share price soaring to $200 by the end of this year.
Top bullish catalysts for BABA shares
There are several bullish catalysts for the Alibaba stock price. First, Alibaba has become a highly undervalued company because of its internal and external challenges in the past few years.
Alibaba trades with a forward P/E ratio of 17.20, much lower than its American peers like Amazon and Google. The multiple is also much lower than the S&P 500 index, which has a multiple of 21.
Second, Alibaba has become one of the biggest players in the artificial intelligence industry. It has unveiled several models that perform all tasks like text generation, and QwQ-32B, which it claims rivals that of DeepSeek.
Alibaba’s AI models have become so successful that it has become the default platform for Apple devices in China. Therefore, the company will likely continue doing well since the AI industry is still in its infancy,
Beijing is supportive of Chinese tech companies
Third, there are signs that Beijing is being supportive of technology companies. Earlier this week, Xi Jinping hosted the biggest tech entrepreneurs in the country, including Jack Ma, for a meeting. This means that Alibaba will likely not experience the regulatory issues it has gone through in the past few years.
Further, Alibaba will likely not be impacted by Donald Trump’s tariffs, because it is less exposed to the United States. Also, American customers will keep buying from China because of the low costs. US semiconductor sanctions will not affect Alibaba’s cloud and AI business.
Analysts expect BABA’s business to keep doing well this year. The average revenue estimate for the current quarter is 237 billion CNY, up by 6.8% from a year earlier. This revenue growth means that its annual revenue may cross the 1 trillion yuan milestone this year.
This growth means that Alibaba will keep buying back shares, a process that has dramatically reduced its share count in the past few years. Its US share count has dropped to 2.31 billion, down from 2.63 billion in 2022.
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