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Alibaba Faces Challenges as Stock Price Shows Bearish Trend

StockInvest.us, 1 month ago

Alibaba Technical Analysis

Alibaba Group Holding Limited (NYSE: BABA) closed the last trading session at $74.66, experiencing a 2.52% decrease from the previous close. The stock's price fluctuated between $74.44 and $75.72 during the day but remained below the 50-day moving average of $77.98 and the 200-day moving average of $86.35, indicating a bearish sentiment in the short-to-midterm trend. The MACD of -0.23 further suggests that the stock may be losing momentum.

The RSI indicator is at 58, suggesting that the stock is slightly closer to overbought than oversold but not at an extreme level. Alibaba's stock has support at $74.51, showing that it is near a critical level that could test the strength of existing buying interest. The resistance is pinpointed at $74.67, just above the last close, and a breakout above this point may signal an upward price movement.

The Average True Range (ATR) stands at approximately 2.57, indicating moderate volatility. With a PE ratio of 10.23, which is relatively low compared to the sector averages, the stock may attract value investors, though its current trading levels are still far below the year high of $121.30.

Fundamental Analysis

Regarding fundamentals, Alibaba's market cap is set at roughly $185.66 billion, backed by a solid EPS of $7.15. With a PE ratio of 10.23, Alibaba appears undervalued when considering the tech market average PE. The discounted cash flow (DCF) valuation stands at $504.51, which is significantly higher than the current trading price, suggesting potential undervaluation.

However, Alibaba is scheduled to release its earnings report on February 21, 2024, which may cause increased volatility in the stock price depending on the outcome. The consensus target price is at $173.02 with a high target of $300 and a low of $83.89, indicating a strong upside potential. Alibaba's next dividends are scheduled for January 18, 2024, with a yield of 1.34%, contributing to the stock's total return.

Alibaba Recent news points towards challenges faced by Alibaba. The company has recently been involved in layoffs at Lazada, which reflects a focus on cost optimization in the face of tough macroeconomic, competitive, and regulatory environments. Alibaba has also been selling XPeng stock, which could be a strategic move to shore up its balance sheet or refocus its investment strategy.

Stock Performance Predictions

For the upcoming trading day, Alibaba may still grapple with the news of further layoffs and their implications for future cost structures and margins. Unless any new positive developments are announced, the stock might continue to face downward pressure or trade sideways as investors digest recent news.

In the upcoming week, Alibaba's performance will likely be influenced by market perception of the cost-cutting measures and shifts in its portfolio investments. Any shifts in regulatory news or competitive dynamics could also impact the stock.

Overall Evaluation

Considering the technical analysis, fundamentals, and recent news developments, the recommendation for Alibaba Group Holding Limited (BABA) would be a 'Buy' for investors with a medium to long-term perspective, as the stock is currently trading below its intrinsic value as suggested by DCF analysis and the consensus target price.

The stock's low PE ratio, relative to the sector means there could be an upside if upcoming earnings present a positive outlook, and the dividend payment could provide some cushion. However, risk-averse or short-term investors might hold off for a clearer trend post-earnings announcement or until more favorable news surfaces to counteract the recent negative sentiment.

Predicting day-to-day movements is inherently uncertain, especially in light of the mix of technical bearish signals and the backdrop of uncertain fundamentals. However, given the significant discount to both DCF valuation and consensus targets, longer-term fundamentals appear to outweigh short-term technical weakness. Thus, the 'Buy' rating reflects a belief in the company's intrinsic value and potential for recovery, rather than expectations for immediate price appreciation.

Check full Alibaba forecast and analysis here.