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​​Alibaba’s share price drops as former CEO steps down from cloud business


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Have Alibaba shares resumed their bearish trend?

Alibaba GroupSource: Bloomberg
 

 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 11 September 2023 15:16

Have Alibaba shares resumed their descent?

Shares for Alibaba fell more than 4% in Hong Kong on Monday after their former CEO, Daniel Zhang, stepped down. This occurred just two months after he had shifted his focus to the company's cloud computing division, leading to concerns about the future of this division and potential disagreements within the company's leadership.

Eddie Wu, the new CEO, will also take on the role of acting CEO and chairman of a struggling sales unit, which is preparing for an initial public offering (IPO) scheduled for the upcoming year. In June, Alibaba announced that Zhang would step down from his CEO position to concentrate on the cloud division, which is the company's second-largest source of revenue.

Alibaba's Cloud Intelligence Group, which was valued between $41 and $60 billion earlier this year, is one of five divisions that Alibaba is planning to separate in the largest restructuring in the company's 24-year history. Despite the changes, Alibaba stated it will continue with its plan to separate the cloud division under a yet-to-be-named management team. It previously announced that it aims to complete this process by May 2024.

Alibaba analyst ratings, price targets and sentiment

Alibaba analystSource: Refinitiv

Refinitiv data shows a consensus analyst rating of ‘buy’ for Alibaba. Analysts show 16 strong buys, 28 buy and 5 hold - with the median of estimates suggesting a long-term price target of $142.00 for the share, roughly 58% higher than the current price (as of 8 September 2023).

Alibaba sentimentSource: IG

IG sentiment data shows that 98% of clients with open positions on the share (as of 11 September 2023) expect the price to rise over the near term, while only 2% of clients expect the price to fall. Trading activity over this week shows 59% of buys and this month 60% of sells.

What does the technical picture look like?

Apart from Alibaba’s swift 37% rally at the beginning of January, its share price has been greatly underperforming other technology stocks over the course of the year and currently shows a year-to-date performance of -2%.

When looking at the New York Stock Exchange (NYSE) listed Alibaba share price one can see that last week the stock price already gapped lower and was already trading back below its 200-day simple moving average (SMA) at $92.58 which is never a good sign for the bulls.

NYSE Alibaba Daily Candlestick Chart

NYSE Alibaba daily candlestick chartSource: Tradingview

The further sharp drop in the share price on Monday morning in Hong Kong is expected to take its New York share price to below its October 2022 to September 2023 uptrend line at $87.15 to its August low at $86.86.

A daily chart close below the August trough would open the door for the March and May lows at $79.48 to $77.77 to be revisited.

Above these lows potential support can be found around the $82.64 July low.

NYSE Alibaba Weekly Candlestick Chart

NYSE Alibaba Weekly candlestick chartSource: Tradingview

While the Alibaba share price remains below its last reaction high – a high on a daily candlestick which is higher than the one preceding and following it – the recent downtrend is expected to continue. It was made at the beginning of September at $96.68.

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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