Alibaba earnings – what to watch ahead of Q2 earnings release

[MongiIG]

Alibaba shares have declined steadily in 2021, and while upcoming earnings are expected to see improved revenue generation, the stock may not respond too positively.

Source: Bloomberg

 Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 02 November 2021 

When does Alibaba report earnings?

Alibaba reports earnings on 4 November, covering its fiscal second quarter (Q2).

Alibaba earnings – what to expect

Q2 revenue is expected to rise to 204 million yuan, from 155 million a year earlier. Net income is forecast to fall to 32.3 million yuan from 49.3 million yuan a year earlier.

The outlook for Alibaba, and investor sentiment toward it, has been dramatically affected by the more direct actions taken by the Chinese government over the past year. While US tech firms have soared, Chinese tech names have taken a dive as the Chinese Communist Party (CCP) looks to crack down on various activities, as well as curbing the success of moguls like Jack Ma, the founder of Alibaba.

This issue overrides the more mundane concerns about earnings and revenue performance, and has resulted in significant investor outflows from Alibaba. The cloud of government action is not going away, which helps to explain why Alibaba shares have performed so poorly this year.

Alibaba broker outlook and forecasts

Despite the negative outlook, 44 analysts still rate Alibaba as a ‘buy’, with three ‘holds’ and only one ‘sell’. An increase in revenue continues to drive this more positive outlook, but it is clear that the market remains sceptical. The median target price of $241 represents 46% upside to the current $164 stock price.

Alibaba stock – technical analysis

Unlike many big name tech stocks, but much like many other Chinese tech stocks, Alibaba continues to see a decline in its stock price over the medium term. This year has been a relentless downward move, one that began a year ago.

The latest bounce has seen the price establish a lower high at $180, hitting resistance around this level as it did in September. A move back below the 50-day simple moving average (SMA) at $162.49 would reinforce the negative view and bring the October low at $140 back into view.

Source: ProRealTime

Alibaba

2021 has been a tough year for Alibaba following the success of 2020, when the company benefited from a post-pandemic recovery like many other big tech stocks.

But it is now a different world for tech stocks in China, and despite some stabilisation of late the outlook seems bleak.