Alibaba price analysis: The pandemic has only solidified the position of Alibaba further

Alibaba price analysis: The pandemic has only solidified the position of Alibaba further
Written by:
Stanko Iliev
25th September, 21:06
Updated: 25th September, 21:07
  • Alibaba continues to dominate the Chinese e-commerce market
  • Even with the COVID-19 pandemic, the business of Alibaba is going very well
  • Alibaba is considering a $3B investment in Asian ride-hailing giant Grab (GRAB)
  • Alibaba and China Mobile will invest $443M in surveillance equipment maker Zhejiang Dahua Technology

The price of Alibaba stock (NYSE: BABA) has advanced from $185 to $299 in less than six months and the current price stands around $271.

Fundamental analysis: Alibaba is a stable company with a good position on the market

Alibaba Group Holding Limited is a Chinese multinational technology conglomerate specializing in e-commerce as the online commerce company with hundreds of millions of users on its Taobao, Tmall and Alibaba.com marketplaces. With a 62% share in consumer retail commerce, Alibaba continues to dominate the Chinese e-commerce market.

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China’s e-commerce market has been growing at a rate of 38.22% and is expected to continue due to rising consumption. This is certainly positive for this company because the explosive growth of e-commerce sales in China will only solidify the position of Alibaba further.

It is important to mention that Alibaba faces competition from JD.com (JD), Tencent and Baidu but analysts believe that Alibaba can sustainably maintain its dominant market position. Even with the COVID-19 pandemic, the business of Alibaba is going very well and the company will have a rise in revenue for the next fiscal year.

Alibaba increased its revenue for the 2020 fiscal year to $71.96B from $56.14B in 2019 and the growth projects will ensure that the numbers will be moving up in the future. The company’s operating cash flow is growing past ten years but Alibaba is investing heavily in its logistic network.

According to the latest news, Alibaba and China Mobile will invest $443M in surveillance equipment maker Zhejiang Dahua Technology. This deal would reportedly happen through a private placement, which could happen in the coming weeks. The company is also considering a $3B investment in Asian ride-hailing giant Grab (GRAB) and this would be one of Alibaba’s largest deals in Southeast Asia.

At its current share price, Alibaba could be a very good short-term investment with solid growth prospects. I said short- term investment because with a $729B market capitalization this stock is overvalued in my opinion and represents opportunity only for short-term traders. 

There are some obvious risks when it comes to trading this stock currently but Alibaba’s stability and size will always be attracting potential investors and traders.

Technical analysis

When trading Alibaba, you should have in mind that the price could also weaken in the upcoming weeks.

Data source: tradingview.com

When we take a look at the chart above ( one year period), we can see that the price of this stock has advanced from $161 to $299 and after that started to fall. As long the price is above this trend line this stock is in the “buy” zone and there is no indication of the trend reversal.

If the price falls on the trend line and if we get a “bullish” confirmation candle it would be a very good entry point for short-term traders who are trading with “stop-loss” and “take profit” orders. The trend line represents a very strong support level, if the price breaks this trend line it would be a very strong “sell” signal and we have an open way to $230.

If the price jumps above $280 it would be a signal to buy Alibaba stock and we have the open way to $300. Rising above $300 supports the continuation of the bullish trend and the next price target could be located around $330.

Summary

Even with the COVID-19 pandemic, the business of Alibaba is going very well and the company will have a rise in revenue for the next fiscal year. With a 62% share in consumer retail commerce, Alibaba continues to dominate the Chinese e-commerce market. There are some obvious risks when it comes to trading Alibaba stock currently but if the price jumps above $280 it would be a signal to buy this stock and we have the open way to $300.

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