Alibaba Stock Price and Forecast: Why is BABA down and $180 once again the target?
- Alibaba stock gives up more ground on Tuesday.
- BABA shares fail to close above the key $200 level.
- BABA is suffering in the wake of the Chinese fallout.
Another day another tough one for Chinese names as the fallout from regulatory crackdowns continues. The SEC is getting involved and looks to be about to clamp down on US listings of Chinese companies, and China itself is far from finished with its regulatory investigations. All in all making for a traumatic backdrop to investors in Chinese names. Certainly, the investor of the moment, Cathy Woods, thinks so as her ARK funds have been cutting some names caught in the crossfire. As FXStreet has mentioned more than once, investors, especially institutional ones, hate uncertainty more than bad news. They can forecast bad news into models, come up with a valuation, etc., but you cannot do this with uncertainty.
BABA shares have tried and failed to consolidate above the psychological $200 level after bouncing sharply from the initial dump to $180. Yesterday BABA stock did not even come close, topping out at $197.44 before closing just below at $197.38 for a loss of 1.4%.
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Alibaba (BABA) key statistics
| Market Cap | $535 billion |
| Price/Earnings | 24 |
| Price/Sales | 5 |
| Price/Book | 3.5 |
| Enterprise Value | $584 billion |
| Gross Margin | 40% |
| Net Margin |
20% |
| Average Wall Street Rating and Price Target | Buy $278 |
Tuesday's weak performance came despite a reasonable set of results. Earnings per share (EPS) beat, but revenue missed analyst expectations. However, BABA has increased its share buyback program by a whopping 50% to $15 billion from a previous $10 billion. The results did show e-commerce growth slowing, and BABA also had to mention the dreaded regulatory crackdown. CEO Daniel Zhang said on the post-earnings conference call, "We are in the process of studying the regulatory requirements, evaluating the potential impacts on our relevant businesses, and we will respond positively with actions."
Alibaba (BABA) stock forecast
The classic downtrend persists: a series of lower highs and lower lows. The only way to break this cycle is for BABA stock to break $217 in the short term and $231 in the longer time frame. This is a bit of an ask given the political and regulatory headwinds surrounding the stock.
Our $180 support, which worked so well on the first leg down, remains in place. This was spotted as the volume profile on the weekly chart below demonstrates.
Breaking $180 brings $170 as the next support, the low from March 2020.
The daily chart gives us some short-term resistance levels, the first being the 9-day moving average at $199.17, close to the $200 psychological level. Most of 2021 has seen BABA in a near-perfect down channel and the recent dump lower to $180 worked well here. This coupled with the volume profile on the weekly chart shows just how good a support $180 was. The top of the channel corresponds to the $217 resistance mentioned.
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Author
Ivan Brian
FXStreet
Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.
