Alibaba Group holding Ltd (MT4 Symbol: ALIBABA), China’s largest e-commerce giant is enjoying the significant growth in online activity during the lockdown caused by the COVID-19 pandemic. While the global economy faltered amid the pandemic, Alibaba (like other technology firms) reported an increase in earnings and revenue during the last reported quarter.
Alibaba expected to report its second-quarter earning result on Thursday 5th November Pre-Market. In the to-be-reported quarter, analysts are expected Alibaba to post a strong revenue in e-commerce and cloud computing business. Alibaba has made continuous effort to add value into its core E-commerce business, the user activities (especially in China) expected to rise as the increased adoption of mobile devices by consumers during the lockdown. The emergence of cloud computing as key technology to battle against the COVID-19 pandemics, the company’s cloud business has been witnessing higher subscription and spending from enterprise customers globally in the first-quarter report and the trend is expected to continue.
The consensus earnings per share (EPS) estimates is $2.06 vs $1.85, an increase +12.6% y/y. The estimated revenue is at 23.1 billion vs 14.97 billion (y/y), a healthy increase of 54.40%. Over the past 4 quarterly reports, Alibaba has beaten EPS estimates in each of the reports.
As Alibaba share tanked more than 8% last Tuesday as Chinese regulator flexed its power and forced Ant Group (affiliate company of Alibaba) to halt its initial public offering (IPO) in China. However, it doesn’t change the analyst forecast as Zacks.com still ranked Alibaba stock at #2 (BUY).
The Ant induced gap-down sent the Alibaba shares below 50-day moving averages in which its climbed back above and closed at $295.64 on Wednesday. The highest price recorded is at $319.24 (Oct 27). On the upside, Bulls need to claim $300 in order to keep the momentum. However, given the uncertainty of US President election outcome and its pending earnings report, the level seems a bit too far to reach in the short term. The 23.6% Fibonacci retracement ($284.01) from the year 2020 swing low-high is the key support to watch. A break below the 23.6% fib will put the 100-day moving averages in play near $268.
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Tunku Ishak Al-Irsyad
Market Analyst, HF Education Office Malaysia
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