The stock of Alibaba (BABA), which is a Chinese company, has continued to lag behind the market in this year. Investors remain concerned about Alibaba’s growth and increasing competition on key markets. Amazon’s American competitor, Amazon, has seen a 10% increase in its stock price.
Amazon vs Alibaba
Alibaba and Amazon share some remarkable similarities. Both are e-commerce titans who have also expanded into other sectors, such as cloud computing. Amazon is currently the largest player in the cloud infrastructure market, while Alibaba ranks fourth.
They have very different e-commerce strategys. Alibaba’s main product mostly focuses on business-to-business, where buyers from around the world order Chinese items. The sellers are primarily responsible for logistics.
Amazon is a platform where customers can purchase its own products as well as those of third-party sellers.
The two companies, however, have taken different paths in the last few years. Amazon is now worth over $1.7 billion, while Alibaba dropped from being the largest Chinese company to the 8th. PDD Holdings – the parent company for Temu, Pinduoduo and Pinduoduo – has overtaken it.
Alibaba has been facing numerous challenges over the last few years. These include regulatory concerns and fierce competition from PDD and JD.com. Its strong growth in the past decade is no longer there.
Alibaba has lost its appeal to investors because of the regulators. Consider its Ant Financial division, for instance. The company, once valued over $300 billion on the private market, was forced to change its model and abandon its IPO plans. It was worth $75 billion in July of last year.
Amazon has, however, seen its regulations become more friendly and expanded into other fields. The company acquired Wholefoods as well as MGM Studios and Zoox. The company has become one of the top providers of artificial intelligence infrastructure.
Alibaba Q1 Earnings Review
Alibaba will publish its financial results next week. Alibaba’s latest results revealed that its business is not as strong as before.
In Q1, its revenue grew by 7% to $30.7 Billion, despite the continued growth of global cloud computing and e-commerce. Amazon, on the other hand, saw its revenue grow at a rate of 13%. This was largely due to growth in cloud computing and retail.
Alibaba’s Net Income dropped 96% from $127 Million to just $126 Million mainly due to its investments abroad. The revenue of its Taobao, Tmall and Cloud Intelligence Groups rose by 4 percent while the revenue of their Cloud Intelligence Group rose by 3 percent.
Alibaba’s cloud division has a weak point, as its growth is not what it used to be. Alibaba’s cloud division offers computing services to its subsidiary companies and others, mainly in China.
The cloud computing market is a relatively small one, largely due to the dominance by American firms like Amazon, Alphabet and Microsoft. Alibaba may also have difficulty selling its cloud-based solutions abroad due to the tensions between the US and the rest of the world.
Cloud computing is a highly competitive industry in China. Tencent, Huawei Baidu, JD and China Telecom are its biggest competitors.
BABA Earnings ahead
Alibaba’s financial results will be published on Thursday. This will give more information on the growth of its business. Investors estimate that Alibaba’s revenue in the third quarter rose from $34 billion to $34.7billion.
Analysts expect earnings per share in Q2 to be $2.12, down from $2.38 last year. Alibaba’s revenue forecast has been missed in both the previous quarters. This trend is likely to continue.
BABA’s stock will also be affected by its future guidance. Analysts predict that BABA’s revenue guidance will be $141 billion in 2014, up from $129 billion the previous year.
Also, investors will be looking at its program of share repurchases. The company reported in a recent report that it had repurchased over $5.8billion worth of shares during the past quarter. It has purchased shares totaling $25.8 billion, since September 2022. This has resulted in a reduction of its shares outstanding from 2,71 billion shares in 2021, to just 2.43 billion shares today.
Alibaba’s stock is considered cheap by most analysts, and they believe it will soon recover. In July I predicted that Alibaba’s return would be spectacular.
Alibaba Stock Price Analysis
On the weekly chart we can see the BABA shares have been moving sideways for the last few months. The price has been essentially unchanged at $80, and it formed a triangle pattern that is symmetrical. This is an important signal.
The stock triangle has reached its convergence level, while the Relative Strength Index is now slightly higher than the neutral 50 point.
Alibaba’s earnings report on Thursday could be the catalyst for a major move in Alibaba’s stock. Support and resistance will be at $67, and $88.
The post Alibaba Stock Price Forecast: Key Levels to Watch Ahead of Earnings may be updated as new information is released.
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