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Monday, July 25, 2016

Alibaba: Poised for Uptrend?

Alibaba is a Chinese e-commerce company that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals (as per Wikipedia). Alibaba is listed on the New York Stock Exchange under the stock code "BABA".

In May last year, I posted about a possible recovery for Alibaba when the share price broke above its downtrend line. After a brief rally to USD95 in May 2015, the stock continued its decline and eventually dropped to USD77 in September.

From the chart below, we can see that Alibaba is now trading above its"downtrend" line, RR. In fact, Alibaba's recent lows have been getting higher (C is higher than B and B is higher than A). Recently, Alibaba's high has finally surpassed its previous high (Z is higher than Y). This satisfies the definition of an uptrend- a higher high (or peak) and a higher low (or trough).

Some may feel that the entire price pattern from April till today is a larger "high". Thus, it is not enough that Z is higher than Y (at USD82.00). Z must be higher than X (at USD86.50).

I believe that Alibaba is probably commencing its upleg now. You may choose to play it safe by waiting for the share price to clear the USD86.50 mark before taking a position.


Chart: Alibaba's daily chart as at July 22, 2016 (Source: Stockcharts.com)

For those of you who like to look at the numbers, I regret to say that I don't have much to offer. My study of this stock is pretty much confine to Yahoo Finance. There is an interesting piece from a contributor to Forbes.com (here). To wit: 

As far as Alibaba goes, I think the days of relatively paltry returns (albeit far better than the return of any of our index funds for sure) could very well be behind us and the Alibaba engine is about to kick into high gear. Consider the following announcements from the company in the last couple of months:

Just last week, Bloomberg reported that Alibaba was readying Ant Financial for an IPO this year and was close to wrapping up a $3.5 billion dollar financing round that values Ant at $60 billion. Alibaba owns about a third of Ant Financial and also currently receives about 37.5% of Ant Financial’s pre-tax earnings which gives us an ownership stake worth $22.5 billion based on the $60 billion fund raising valuation.

On April 12, 2016, Alibaba announced a $1 billion investment in Lazada Group, an eCommerce company with operations in Indonesia, Singapore, Thailand, Vietnam and the Philippines. On a combined basis, these 6 countries have a population of 560 million or so with an approximate internet user base of 200 million.

On March 21, Alibaba announced that it reached three trillion RMB or $463 billion in GMV (gross merchandise volume) for fiscal year 2016 ended March 31, almost a week and a half ahead of the close of the quarter.

In the latter third of 2015, Alibaba announced that it was part of a group that consisted of Foxconn, Softbank , Temasek, Premji Invest (Investment Fund of Wipro founder Azim Premji) among others that had invested $500 million in India’s e-commerce company, Snapdeal, at a $5 billion valuation.

Maybe, beginning with the Ant Financial IPO sometime in 2016, Alibaba has begun the process of unlocking shareholder value and could see its shares appreciate at a faster clip than the tepid rate of return since the IPO in late 2014.

Better luck this time!

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Alibaba.

1 comment:

Ivan said...

Thank you for your sharing, Alex.

What is your call on Yahoo and Alibaba? Will Alibaba takeover the remaining balance assets of Yahoo ?

After sold it's core asset, Yahoo leave Alibaba shares + Yahoo Japan + cash USD12 bil + non core asset worth USD 1 bil.

Snapdeal, at a $5 billion valuation – I Would prefer Alibaba buy the Yahoo core-asset with this amount.