Alibaba Stock Forecast: BABA sinks 6% as revenue slows, profits fall

  • Alibaba management approves another $25 billion worth of buybacks.
  • BABA trades lower as profits fall from a year ago, revenue growth slows.
  • Alibaba stock continues to trade about 75% off its 2020 high of $319. 
  • Retail sales have slowed nationwide in China as real estate bubble unwinds.

Alibaba (BABA), once the leading light among Chinese stocks owned by foreigners, hit yet another snag on Wednesday. China’s ecommerce leader reported another ho-hum earnings report, this time for the third fiscal quarter ending in December.

BABA stock sank 6% on Wednesday as adjusted earnings per American depository share (EPADS) printed at $2.67. This was slightly higher than consensus but beneath the $2.79 earned one year prior.

The S&P 500 contracted 0.85% on Wednesday, while the NASDAQ fell 1%.

Alibaba revenue of $36.67 billion rose a meager 5% YoY and underperformed some consensus estimates while beating others. Management seemed clear-eyed about the once dynamic company’s situation.

“Our top priority is to reignite the growth of our core businesses, e-commerce and cloud computing,” said Alibaba’s new CEO, Eddie Wu. “We will step up investment to improve users’ core experiences to drive growth in Taobao and Tmall Group and strengthen market leadership in the coming year.”

The company is in the process of splitting up into six distinct units, some of which are expected to eventually hold their own IPOs. Two of the most important segments, Cloud Intelligence and the Taobao & Tmall Group, grew their revenue just 3% and 2%, respectively, on an annual basis.

Diluted earnings per ADS, similar to GAAP results, came in at $0.80 in fiscal Q3. This fell from $1.49 in the previous quarter ending in September.

The domestic retail segment grew revenue just 1% YoY, but the much smaller domestic wholesale business saw sales rise 23%. Meanwhile, the International Digital Commerce segment, which manages Lazada, and AliExpress, posted a 44% increase in annual revenue.

Interestingly, Alibaba’s board signed off on a $25 billion addition to its stock buyback policy, but the market panned the extremely large announcement. That buyback would reduce current shares outstanding by about 12.5%. 

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Alibaba stock forecast

Alibaba stock has been trading largely sideways for much of the past two years after its large-scale collapse in 2021. Shareholders have grown used to BABA stock trending in the $60s and $70s, prices it traded at a full decade ago.

The 50-day Simple Moving Average has remained below the 100-day counterpart since October 16 of last year. With the fiscal Q3 result in the bag, there are no near-term catalysts for BABA. Even an extremely generous $25 billion buyback announcement couldn’t whet appetites.

Near-term support might hold at $73.28, a long-term fortification from March 2022. Further down, the $67 level from January might again come to the rescue. Otherwise, bulls may have to wait for entry at $63.40, a level that saw measured respect in October 2022.

BABA daily stock chart

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