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Alibaba's share price falls after results but broker ratings still suggest a buy

Alibaba Group Holdings has confirmed in its Q1 2023 results that it plans to separately list its cloud business.

Source: Bloomberg

Alibaba Group Holding (BABA.K) Q1 2023 results

Alibaba first quarter results were the company’s first reported since the broader reopening of the Chinese economy. Revenue growth of 2% saw the 208.2bn Yuan figure slightly short of consensus estimate estimates which had predicted a turnover figure of 209bn yuan. Earnings per share (on a non-GAAP basis) were a miss on consensus as well coming in at 1.34-yuan vs the 2.08-yuan median estimate.

The results highlighted a weaker than expected domestic eCommerce business, owning to a slower than expected Chinese recovery post pandemic. The groups cloud business also missed earnings to contribute to the slower than expected group figure.
The company has now restructured into six business units namely: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group, and Digital Media and Entertainment Group.
The Cloud Intelligence Group will be the first of the business units to unbundle from the group and list separately.

Alibaba Group Holdings ADR (all sessions) – technical view

Source: IG

The US listed ADR (American Depository Receipt) of Alibaba saw a sharp contraction after the results release falling more than 5% on the news.

The price currently trades within a range between levels 95.50 (resistance) and 79.80 (support). There has been a bearish reversal off the resistance of the range and from overbought territory. This move suggests support at 79.80 to be the initial downside target from the move.

Broker ratings and price targets

Source: Refinitiv

A Refinitiv poll of fifty-one analysts / brokers maintain a long-term average rating of buy for Alibaba (as of the 19th of May 2023), with sixteen of these analysts recommending a strong buy, thirty recommending a buy and five recommending a hold on the stock. There are currently no sell or strong sell recommendations on the company in the survey.

A median long term price target from these analysts arrives at an ADR price of $142.97, roughly 67% higher than the current share price (as of the 19th of May 2023).

IG client sentiment

Source: IG

The vast majority (97%) of IG clients with open positions on the Alibaba expect the price to rise in the near term, while only 3% of clients with open positions expect the price to fall. The client sentiment indicator represents a snapshot of open positions as of 1pm (GMT) on the 19th of May 2023.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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