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With Alibaba due to release its latest earnings on Wednesday 12 August, there is understandably more interest than usual in this Asian e-commerce powerhouse.
2015 has failed to provide much positivity for the likes of Alibaba, which is not alone given the recent weakness of rivals Baidu and Tencent, all failing to live up to expectations. The 23% loss in market value of Alibaba is a testament to this shift and, given the range of bad news stories associated with the firm of late, there is little reason to expect a particularly robust earnings report come next week.
February saw the suspension of its lucrative online-lottery sales due to increased pressure from industry regulators. Alibaba’s Juhuasuan platform was also hit with commission cuts, which will no doubt impact the bottom line. However, possibly the biggest worry will be about the slow monetisation of the mobile platform which is expected to become an increasingly important aspect of the sector.
Whilst these events have impacted market sentiment, they have also lowered expectations on the street and this provides a lower bar for the release. Thus I would expect a lessened chance of a large downside shock, whereas outperformance could have a disproportionately larger effect. Market estimates point towards earnings per share of 44 cents, with sales of $3.4 billion.
Despite recent worries, market analysts have an overwhelmingly bullish outlook for the firm, with 46 buy ratings, four holds, and two sells. This could have something to it, as the stock continues to fall, so investors will begin to see a possible long-term long entry opportunity. Given the high expectations of the firm during its IPO procedure, it may be time to start picking up this giant at a more favourable price.
From a technical perspective, the share has been trading within a falling wedge since its inception and with price currently around the middle of this range, direction is harder to ascertain. A previous support zone of $76.22-77.77 is worth noting as a possible source of upside momentum should we see further deterioration for the share price. Price appears to be moving higher from that range for now and intraday analysis points towards the possibility of further gains.
However, ultimately, we will need to see a move above $85.65 to bring confidence of a bullish reversal in play here and until then, it seems worthwhile to continue trading the extremes of this wedge. The current top of the wedge comes in at $83.75, which corresponds with the 50 day simple moving average. The support levels to watch are $77.775, $76.22 and $75.60.