Alibaba Group Hldg Ads
Alibaba Group Hldg Ads
BABA
7.33%
62%
- Stock moved from consolidation to buy zone with entry at 231.24
- China stocks Pinduoduo, JD.com have relative strength in high 90s
- Alibaba's relative strength not as high, at 78, out of a possible 99
Industry Group Ranking
Emerging Pattern
Consolidation
A sideways pattern that doesn’t fit traditional base definitions. Sometimes will have a handle.
E-commerce giant Alibaba Group (BABA) is the IBD Stock of the Day as Chinese stocks rally on upbeat economic data. Alibaba stock moved into a buy zone after a 23-week consolidation amid the global coronavirus pandemic.
XAlibaba stock, an IBD Long-Term Leader, owned a Relative Strength Rating of only 78 out of a possible 99 before today's breakout. Shares jumped 7.3% to close at 240 Monday.
The rating tracks market leadership by showing how a stock's price movement over the last 52 weeks measures up against that of other stocks. The best-performing stocks hold ratings above 80. Alibaba's relative strength line, though, has perked up.
China shut down early in 2020 to control the Covid-19 outbreak. Alibaba stock hit a low of 169.95 in mid-March.
However, Alibaba cited a "steady recovery since March" when it reported quarterly earnings on May 22. That optimism was reinforced today as China's CSI 300 index of Shanghai- and Shenzhen-listed stocks jumped on views that the country's economic rebound is gaining momentum.
It also helps that China's Caixin Manufacturing Purchasing Managers Index came in better than expected for June.
Alibaba Stock: Cloud Computing A Growth Engine
Alibaba stock's entry point was 231.24, though some may figure a handle formed to create an earlier buy point of 231.13.
Founded by Jack Ma, Alibaba is the largest e-commerce company in China, where it competes with JD.com (JD) and Pinduoduo (PDD). JD.com stock also gained on Monday; Pinduoduo stock fell.
Pinduoduo holds a Relative Strength Rating of 98 while JD.com's is 95, according to IBD Stock Checkup. Alibaba and JD.com handled a record $136.5 billion of sales through their e-commerce platforms during the 618 shopping festival, according to reports. The shopping festival falls on June 18.
Much like Amazon.com, Alibaba is more than an e-commerce powerhouse. It also operates a cloud-computing group as well as digital media and entertainment properties.
Cloud computing is one of Alibaba's fastest-growing business units. While Alibaba is the No. 1 cloud provider in China and broader Asia, it ranks No. 3 globally behind Amazon and Microsoft (MSFT).
Tencent Holdings (TCEHY) and Baidu (BIDU) have stepped up cloud investments. Aiming to stay the cloud leader in China, Alibaba plans to invest $28 billion over three years in its cloud infrastructure. The outlay includes investments in operating-system software, servers and chips, and the expansion of its data centers.
Digital Advertising Revenue Growth To Slow
In digital advertising, Alibaba also competes with Tencent and Baidu. Research firm eMarketer estimates that Alibaba's digital ad revenue will rise 6.5% in 2020 to over $27 billion, slowing from 24% growth last year. The company garners ad revenue from internet searches tied to its e-commerce business.
Similar to Amazon, Alibaba has made a big push into groceries and increasingly focuses on brick-and-mortar retail operations. Another growth driver comes from international expansion.
Further, Alibaba stock holds an Accumulation/Distribution Rating of C-plus.
The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
The company held its initial public offering in 2014 and remains the largest tech IPO ever. SoftBank Group founder Masayoshi Son in June stepped down from Alibaba's board of directors.
The internet retail industry group ranks No. 3 out of 197 industry groups tracked by IBD.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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