Alibaba Stock News and Forecast: Unable to catch a bid, BABA targets $86 next

BABA shares drop another 3.5% on Thursday intraday.
The Russian invasion has hurt most tech stocks.
Alibaba reported Q4 adjusted EPS of $2.67 on revenue of $38.3 billion.

Clay Webster FXStreet

Alibaba stock (BABA) has dropped another 3.5% midday to $101.73 in New York. This is one stock that just cannot get a bid. The harsh sell-off that began with government scrutiny 15 months ago seems destined to drop through $100 to retouch support at $86.

Alibaba Stock News: Fund managers blame slowing consumer spending in China

Alibaba has not had much news flow since earnings were announced on February 24. Adjusted earnings per share of $2.67 were 5% above the $2.54 consensus figure. Revenue of $38.33 billion was about $500 million short of the average estimate though. Sales rose about 12% YoY in dollar terms.

Wall Street analysts said sales appeared to be slowing long term. The company's cloud unit, a big part of BABA bulls' case, grew just 20% YoY against global peers growing above 30%.

Longleaf Partners International Fund wrote about the current negative environment and situation of the company in its recent letter to investors. "Slowing consumption, combined with stiff competition from new entrants in livestreaming ecommerce, have resulted in transitory deceleration in Alibaba’s core ecommerce growth trajectory. Additionally, the company is accelerating strategic investments in new initiatives, including Community Group Buying (Taocaicai), Taobao Deals, Local Consumer Services and International Ecommerce. These are future growth drivers but are depressing company’s earnings today."

Harding Loevner Emerging Markets Equity Fund struck a similar tone in another recent note to clients: "Consumer Discretionary was dragged down by continued weakness in Chinese e-commerce stocks, particularly Alibaba, which reported significant deceleration in its core commerce business in the [fiscal] third quarter."

Alibaba Stock Forecast: $86 is where BABA is headed, folks

BABA stock has been trending down for 15 months now. It has broken through month after month of support levels. Now it is hovering over psychological support at $100. It certainly will most likely break $100 since news of the war in Ukraine, the economic slowdown in China, and ongoing global supply chain and inflation issues continue to clog the headlines. $109.76 was more important support than $100, and you see what happend there.

At this point, $86 seems like the only available refuge of support as BABA has remained below major moving averages for months, only occasionally making above the 9-week moving average. $86 served as support back in late 2016, and the lack of confidence in the stock has brought it all the way back here. Only making it back above $109.76 could provide any hope.

BABA 1-week chart

$86 may seem unbelievably low, but then so is $100. Keep in mind that the weekly chart has shown a sharply dropping price channel for BABA for more than a year. It is now pointing straight at $86.

BABA 1-week chart

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Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

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