Alibaba’s stock price surged. Will this recovery last?

Alibaba (NYSE:BABA) stock price staged a strong comeback after the company reported strong quarterly results. The stock jumped more than 15% on Thursday, pushing it to the highest level since May 17. Still, the company still has a long way to go given that its stock has slumped more than 70% from its all-time high.

Income from Alibaba

Alibaba had a strong quarter even as the company struggled. The company’s revenue rose 4.4% to $30.24 billion, $555 million more than analysts expected. The company’s earnings per share rose to $1.18.

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The company’s commerce revenue in China jumped 8%, while local consumer service revenue increased 29%. At the same time, the highly watched cloud computing division saw its revenue increase by 12%. Although these growth figures are not spectacular, investors have been encouraged by the operating environment in which the company operates.

The company has a strong balance sheet. It ended the first quarter with over $54 billion in cash and very little debt. As such, the company has a cash to market cap ratio of around 4.7 which is attractive. The company is also continuing its share buyback program with the aim of increasing shareholder returns. In March, it increased its buyout plan from $15 billion to $25 billion.

There are other reasons why Alibaba’s stock price could rally. First, there are signs that regulators in Beijing are working to ease the regulatory burden the company faces. This will happen since the Chinese economy is in trouble. Data released today showed that industrial profits are collapsing.

Second, the stock is very cheap since many investors are currently driven by fear. Moreover, the company still has many growth drivers, such as its dominant market share in global trade.

Alibaba stock price prediction

Turning to the daily chart, we see that BABA’s stock price has been following a strong overall downtrend. As a result, stocks remained significantly below the 50-day moving average level, signaling that the bears are under control.

Recently, we see the stock finding a bottom at a support level around $80. This could be a sign that the stock is bottoming out. However, the stock still remains below the descending trendline shown in blue.

Therefore, although the fundamentals are positive, the technical data suggests that the sell-off may continue for some time. A bullish retracement will occur when the security moves above the descending trend line.

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Karen J. Nelson