Alibaba Stock News and Forecast: BABA shares rise 10% as company breaks up into six entities

Alibaba (BABA) stock has surged 9.9% in Tuesday's premarket to $94.60 after the digital conglomerate announced its plan to split up into six separate entities. The company's ADRs are down 73% from its late 2020 highs when Alibaba founder Jack Ma got into hot water with regulators for a speech he gave calling for better financial regulation ahead of the related Ant Financial IPO. That $37 billion IPO was held up, and Alibaba's prospects have never regained their composure in the more than two years since.

Alibaba stock news: Is this the end of Alibaba?

It was only Monday that the South China Morning Post newspaper reported that founder Jack Ma was back in the picture. After living outside of China for more than a year, much of the time in Tokyo, Japan, Ma returned to China this week to visit a school he helped fund more than half a decade ago. Ma gave a seemingly inconsequential speech at the school regarding the future of artificial intelligence in education, but now his presence seems to have had other motives. 

On Tuesday, Alibaba announced the split into six units, which it said would allow each division to seek out its own financing or even IPO. Current CEO Daniel Zhang will lead the cloud intelligence division, while former international retail head Jiang Fan has chosen to take over the main ecommerce unit. Trudy Dai will head up Taobao TMall. 

Alibaba did not named leaders of its other three units: media and entertainment, meal delivery and other local services, and the Cainiao logistics unit. It sure seems as if this is the end of Alibaba as we know it, but maybe this is just a ploy to win over exhausted regulators.

"At 24 years of age, Alibaba is welcoming a new opportunity for growth," said Zhang. "The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready."

Some critics might surmise that this is another means of getting around Chinese officials, who have spent the better part of the last two years putting pressure on Alibaba and other large tech giants. Just last week Ant Financial said it had been cleared by regulators to move forward with an IPO. Alibaba owns about one-third of Ant Financial and its crown jewel, Alipay.

Alibaba stock forecast

Now trading in the vicinity of $95, BABA stock has broken above the 100-day moving average. The market obviously thinks a break-up would lead to higher valuations for the separate units, and thus at least some further upside is warranted. The 50-day moving average at $99 comes next among possible barriers, and there is the $103 to $105.30 supply zone where bulls would likely take profit. The currently daily pivot is at $96.40, and the R1 aligns with the top of that range at $105.30.

BABA daily chart