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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Alibaba’s fundamentals overshadowed by government actions ahead of earnings

Alibaba continues to enjoy strong revenue and customer growth, but the decline in its stock price reflects a bleaker outlook thanks to the actions of the Chinese government.

When is Alibaba’s earnings date?

Alibaba reports earnings on 3 August, covering its fiscal first quarter (Q1).

Alibaba earnings – what to expect

Alibaba is expected to report revenue of $32 billion, with earnings per share of $2.24.

Alibaba continues to enjoy excellent growth, achieving one billion customers in the 2021 financial year (FY2021), with the vast majority of these based in China. Profit margins and revenues have risen at a steady pace in every year since 2013, at 10% and 23% respectively.

However, for Chinese tech shares such as Alibaba, the main concern is no longer business performance, but the attitude of the Chinese government instead. The cancellation of the Ant Financial initial public offering (IPO) and the current clampdown on tutoring stocks points towards a much more restrictive approach to the private sector.

As many could have predicted, the culture clash between free market capitalism and the controlling instincts of the Chinese Communist Party has begun anew, with the Party determined to rein in the perceived excesses of the free market.

This is a situation unfamiliar to many investors, unused to the impact of government interference on most companies except in relatively isolated circumstances, and accounts for the underperformance of Chinese shares, with Alibaba no exception.

Find out more on how to buy, sell, and short Alibaba shares

Alibaba broker ratings

A total of 17 analysts currently rate Alibaba as a ‘strong buy’, with 30 more at ‘buy’. Three analysts have a ‘hold’ rating, and only one ‘sell’.

Alibaba stock – technical analysis

The direction in Alibaba stock is clear for the time being. Rallies have been regularly sold, with the latest bounce in late June running into the 100-day simple moving average (SMA), currently 22,225.

With the macro outlook so unfavourable the stock continues to reflect investor caution, so it looks like further declines are on the cards as the price targets 18,000 and lower.

A solid business, but outlook continues to darken

Alibaba has plenty to commend it from a fundamental perspective, but with Beijing adopting an activist position the stock continues to decline.

Investors might argue that this means Alibaba is becoming a bargain, but traders will want to see a turnaround in the price, which is unlikely to happen unless the Chinese government reduces its interventions.

This information has been prepared by IG, a trading name of IG Markets Limited. 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. See full non-independent research disclaimer and quarterly summary.

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