Alibaba stock price has remained in a tight range in the past few months as the momentum it had earlier this year faded. BABA was trading at $120 on Monday, down by 17% from its highest point this year as focus shifts to its upcoming quarterly results.
Alibaba’s business is in a turnaround mode
Alibaba is a top Chinese company whose services are used by millions of people each day. It is an e-commerce juggernaut connecting sellers with buyers and a major player in the cloud computing industry. As a result, it is widely compared with Amazon, a company that dominates these industries.
Alibaba’s business is also wider in scale than Amazon. For example, it runs Ele.me, one of the biggest players in the food delivery industry in China. It also operates Sun Art, a supermarket business, and Alibaba Health.
Alibaba and Amazon stocks used to move in the same direction in the past. This changed a few years ago when Jack Ma, its founder, started to criticize the regulators, triggering a major crackdown that cost it billions of dollars and decimated Ant Financial, its fintech business that was once valued at over $300 billion.
The management has continued to implement a turnaround by focusing on innovation, cost efficiencies, and shareholder returns. Over time, its outstanding shares have plunged to 2.3 billion from 2.7 billion five years ago.
BABA earnings ahead
Alibaba stock price will be in the spotlight this week as the company publishes its results, which will provide more color on its business, especially its cloud computing division.
The most recent results showed that Alibaba’s business continued its gradual growth in the first quarter. Its revenue rose by 7% in Q4 to RMB 236 billion, which was equivalent to $32.6 billion.
This growth was facilitated by the Taobao and Tmall businesses and its cloud division. Taobao and Tmall grew by 12%, while the cloud division rose by 18%, helped by the artificial intelligence (AI) segment.
Alibaba’s net income surged to RMB 11.97 billion in Q4, bringing its full-year metric to over RMB 125 billion.
The most notable part of its report was that its AI division was contributing meaningful revenue to its cloud segment. Its AI business brought in triple digit growth, with companies in areas like retail, media, and energy being widely used.
A key solution that is being highly popular among enterprise customers is Lingma, an advanced AI coding solution.
The average estimate is that Alibaba’s revenue rose by 4.33% in Q1 to RMB 253 billion, while its earnings per share was RMB 15.47. For the year, BABA’s revenue is expected to grow by 6.3% to RMB 1.06 trillion.
A closer look at key multiples reveals that Alibaba stock is undervalued, with a forward price-to-earnings ratio of 16.4, significantly higher than that of other companies.
Alibaba stock price technical analysis
BABA stock price analysis | Source: TradingView
The daily chart shows that the BABA stock price remains in a narrow range this month. It has moved slightly above the 50-day and 100-day Exponential Moving Averages (EMA).
The stock has also formed a giant symmetrical triangle pattern whose two lines are nearing their confluence. Therefore, the most likely scenario is where the stock rebounds after earnings. If this happens, the next key point to watch will be at $132.10, the highest swing on May 13.
Read more: Top reasons why Alibaba stock price is about to explode higher
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