As Alibaba boosts share buyback plan, is it time to buy?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Aug 3, 2021
  • Alibaba shares edged lower 1.35% on Tuesday after announcing its most recent quarterly results.
  • The company reported its fiscal Q1 earnings, beating expectations while revenue fell short.
  • The Chinese e-commerce giant also boosted its share buyback program amid the falling stock price.

Alibaba Group Holding Ltd (NYSE:BABA) shares edged lower 1.35% on Tuesday after announcing its most recent quarterly results. The company reported its fiscal Q1 earnings before markets opened, beating analyst expectations by 15.88%. 

In the company’s recent quarterly results, Alibaba Group’s earnings per share of RMB16.60 ($2.57*) beat the consensus Street estimate of $2.22. However, the revenue of RMB205.74 ($31.80*) billion missed the average analyst expectation by RMB2.93B billion ($450 million), despite growing by 33.8% year-over-year.

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The company also boosted its current share buyback program by 50% to $15 billion, the largest since inception, to appease shareholders amid a falling stock price. Alibaba shares have fallen nearly 38% since last October amid pressure from the Chinese government.

The company has continued diversifying operations over the years, with last quarter’s international revenue rising by 54% to $1.7 billion. On the other hand, its cloud computing business saw sales surge 29% to $2.5 billion.

Should you buy BABA shares in Q3 2021?

Although Alibaba shares have plunged significantly since late last year, the stock price could bounce back soon after boosting its share buyback plan. Troubles in China have affected the company’s core ecommerce business, which grew 35%Y/Y in the last quarter compared to 70% Y/Y growth reported in the preceding quarter.

Therefore, as the core business continues to experience slow growth, the company’s diversification will begin to pay off. In addition, Alibaba shares trade at an attractive forward P/E ratio of 16.87, making the stock compelling to value investors. Moreover, with analysts expecting earnings to grow by 22.95% next year, growth investors could show interest.

Source – TradingView

Technical overview: BABA stock price predictions for August 2021

Technically, Alibaba shares appear to be trading within a descending channel formation in the daily chart. The stock price recently bounced back to avoid slipping to oversold conditions in the 14-day RSI. Moreover, it continues to trade below the 100-day moving average after crossing under last October.

Therefore, investors will target rebound profits at approximately $215.91 or higher at $231.26. The key support levels are $180.25 and $160.93. BABA shares closed at $197.38 per share on Tuesday.

Bottom line: the case for buying BABA stock price rebound

In summary, although Alibaba shares continue to trade under intense bearish pressure, Tuesday’s better than expected fiscal Q1 results and the 50% boost to the share buyback plan could benefit the stock price. Therefore, investors can bet on a significant rebound ahead of the buyback plan.
*Based on the exchange rate at the time of writing.

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