Chinese internet firm Alibaba (Nasdaq: BABA) has been hit hard by the trade war and a slowing Chinese economy. The Stock fell over 38% from its high in June to the low in October. The stock bounced back in November, but fell again in December. The worst part is that the company has really strong fundamentals and hasn’t been able to break the downward trend.
We see on the daily chart that the highs from June and December connect to form an upper rail to a downward sloped trend channel. The stock is hitting the upper rail of the channel at this time and the company is set to report earnings on January 30.
The $130 area has proven to be a strong support level for the stock as that area marked the low at the end of October and the stock formed a double-bottom there in December and early January.
Alibaba has seen earnings grow by 32% per year over the last three years while sales grew by 53% during that same period. The most recent quarterly report shows how the rate of growth has slowed for earnings, but the sales growth was still great. Earnings only grew by 9% while sales grew by 49%. The company boasts a return on equity of 26.3% and a profit margin of 44.9%.
Given the fundamental performance of the company, it is hard to explain the tremendous decline in the stock price. With the earnings report looming in a few weeks, investors will be looking for the stock to break the downward trend.
The 10-day moving average for BABA crossed bearishly below the 50-day moving average on March 27, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 15 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
The Momentum Indicator moved below the 0 level on April 12, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on BABA as a result. In of 85 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for BABA turned negative on April 15, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 53 similar instances when the indicator turned negative. In of the 53 cases the stock turned lower in the days that followed. This puts the odds of success at .
BABA moved below its 50-day moving average on April 12, 2024 date and that indicates a change from an upward trend to a downward trend.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where BABA declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for BABA entered a downward trend on April 18, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
The Stochastic Oscillator demonstrated that the ticker has stayed in the oversold zone for 2 days, which means it's wise to expect a price bounce in the near future.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where BABA advanced for three days, in of 266 cases, the price rose further within the following month. The odds of a continued upward trend are .
BABA may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (1.201) is normal, around the industry mean (3.687). P/E Ratio (12.876) is within average values for comparable stocks, (59.120). Projected Growth (PEG Ratio) (0.556) is also within normal values, averaging (1.854). Dividend Yield (0.014) settles around the average of (0.026) among similar stocks. P/S Ratio (1.383) is also within normal values, averaging (10.316).
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. BABA’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating slightly better than average sales and a considerably profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. BABA’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 91, placing this stock worse than average.
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
an online and mobile commerce company
Industry InternetRetail