BABA Stock Forecast: Alibaba Group Holding targets key support as everything dumps

Alibaba (BABA) is the Chinese Amazon (AMZN) and with China being a country of nearly 1.5 billion people, that is an impressive marketplace.

BABA is one of China’s most successful internet companies and has a similar business model to Amazon with an online retail marketplace, a cloud business, and a fintech e-payments business called ANT Group. ANT Group was due to IPO in late 2020 but was pulled at the last minute after BABA and ANT founder Jack Ma gave a speech in which he appeared to criticize Chinese regulators and the banking industry. The IPO (Initial Public Offering) was canceled, and BABA's share price struggled, losing over 30% of its value.

2021 has seen the volatility in BABA shares continue. Initial optimism over regulatory concerns being resolved saw a strong appreciation to start 2021 for BABA. The shares traded strongly up to $270 from an opening level of $226 for 2021. Since then, however, ANT Group has seen its valuation reduced from the IPO level circa $315 billion to about $200 billion. ANT Group is undergoing considerable change in order to respond to regulatory concerns following its failed IPO. CEO Simon Hu resigned on March 12 in an unexpected move. ANT Group is changing its structure in response to regulatory concerns over its micro-lending division, moving toward more of a financial holding company structure rather than a fintech company. This will no doubt affect ANT Group's valuation as financial stocks do not command the same premium as technology companies. The change may also affect its business model and revenue and require further capital.

The WSJ added more pressure to BABA shares when it reported in March that Chinese authorities were concerned over Alibaba's growing media influence. Alibaba has stakes or ownership of Weibo, South China Morning Post and Bilibili among others. The WSJ had also reported on Thursday, March 11 that China is considering a record $975 million-plus fine for Alibaba and wants BABA to distance itself from Jack Ma. 

BABA price prediction

It would appear that China does not want to destroy Alibaba but merely bring it back into line with how China does business. Alibaba (BABA) is a staple Chinese company and almost part of the way of life now for a lot of Chinese consumers. Added to this, Alibaba has large global institutional shareholders who would take a dim view of being totally wiped out of their investment. China likely knows this and is merely trying to balance its own interests, coupled with those of having an economy that encourages investments and accessibility. The situation is likely to play out over the next few months and will weigh on the share price. But once and if resolved, BABA has a solid business and powerful revenue stream that should underpin the share price. Picking the right entry point will be the tricky part. 

Alibaba is currently sitting on a perilous support line at $219.97. This really is the last chance saloon as BABA broke the trend line support in place from April 2020. A break here and the next target is the lows from March 2020 at $170. 

To turn bullish, BABA needs to break back above the lower trend line and break the 9 and 21-day moving averages. This will then target the upper trend line at $238.30.

Indicators are bearish with the Moving Average Convergence Divergence (MACD) and Directional Movement Index (DMI) both crossing into bearish territory. 

BABA releases Q1 results on Thursday, May 13. Earnings per share are expected to be $1.80 on revenue of $27.52 billion. 

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