Alibaba stock price has nosedived even after Beijing announced a $1.4 trillion plan to rescue the troubled economy. BABA has retreated in the past six consecutive weeks as investors react to Donald Trump’s win and its implication for the Chinese-US relationship. It dropped to $95.4, down by 20% from its highest level this year.
Alibaba stock drops after Trump election
BABA share price has been in a strong sell-off after Trump’s win raised the possibility of a tense relationship between the United States and China.
The tensions rose after the New York Times reported that Trump had picked Marco Rubio, a Senator from Florida to become the Secretary of State in his administration. Rubio is one of the top China hawks in the Senate, meaning that relations will escalate.
Trump has also threatened to be tough on China, including by imposing tariffs in his bid to lower the trade surplus. As with the last administration, there is a likelihood that delisting Chinese companies from US bourses could be an option.
The other option that could hurt Alibaba is limiting American technology like semiconductors from being sold to the firm. These measures could hurt the company, especially its cloud-computing division, which aims to be China’s alternative to Amazon’s AWS.
Still, it is unclear whether these measures will have a major impact on Alibaba in terms of its revenue growth. For one, more tariffs on Chinese goods, as we have seen in the past, have not had an impact on the volume it sells to the country.
BABA earnings ahead
The next important catalyst for Alibaba’s stock price will come out on Friday when the company publishes its financial results.
These results will show whether the company’s growth is continuing or whether it has continued to slow. The average revenue estimate for its revenue is $33.27 billion, up by just 5.4% from the same period last year. The highest revenue estimate is $34.2 billion, while the lower estimate is $32.9 billion.
Alibaba’s earnings per share is expected to have dropped in the last quarter. Precisely, analysts expect that the EPS will be $2.07, lower than the $2.17 it made last year.
A key challenge for Alibaba is that the Chinese economy is not doing well, and the recently announced stimulus will be aimed at local governments and not areas that would spur consumer spending. Chinese retail sales and inflation have remained under pressure in the past few months.
The other key challenge for Alibaba stock is that its cloud computing division is not growing as fast as its peers. Its revenue rose by just 6% in the second quarter to $3.6 billion, while its top competitors like AWS and Azure jumped by double digits.
The main issue with Alibaba Cloud is that its business mainly targets Chinese companies and has struggled to grow internationally.
Analysts are bullish on Alibaba share price
Wall Street analysts are generally bullish on the BABA stock price. 47 of the 48 analysts who have shared their outlooks have a buy or a strong buy rating. Only one analyst has a hold rating. Some of the most bullish analysts are from companies like Barclays, Goldman Sachs, Baird, and JP Morgan.
The average Alibaba stock price forecast among analysts is $119, much higher than the current $84.54. This target implies a 255 upside from the current level.
Most analysts believe that Alibaba is highly undervalued and that its large share buybacks will lead to more upside.
Read more: Buy Alibaba stock for a 50% return over the next twelve months: Loop Capital
Alibaba stock price analysis
BABA chart by TradingView
The weekly chart shows that the BABA share price has pulled back, falling in the past six consecutive weeks. This retreat happened after it retested the crucial resistance point at $116.51, its highest swing in January 2023 and the 23.6% Fibonacci Retracement level.
The stock has formed a cup and handle pattern, one of the most popular bullish signs in the market. Also, it has remained above the 50-week and 100-week exponential moving averages, meaning that bulls are in control for now.
Therefore, the Alibaba stock price will likely have a bullish breakout, with the next point to watch being at $182.62, up by 91% from its current level.
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