Alibaba Group [NYSE: BABA]: In spite of the ongoing trade war between the United States and China, Alibaba continues to record significant growth in revenues. The company has released its earnings report for the last quarter, and it recorded a growth of 51%. Analysts expected the company to record revenues of $13.3 billion, but Alibaba has reported revenues of $13.6 billion. This explains why there is lots of bullish sentiment around this company at the moment. At the moment, Alibaba is up by 1.58%.
The revenues are driven by the company’s growing customer numbers. It has experienced an exponential growth in customer numbers, and now stands at 654 million customers annually. It is noteworthy that the company’s customer base has grown significantly in less development cities. According to its earnings report, consumers from such cities contributed a total of 70% of all the customers that the company has added this year.
One of the key factors driving Alibaba’s growth is improved consumer spending in China. In spite of the trade war, China’s consumer sentiment has got better due to a series of stimulus programs. In fact, analysts believe that the Chinese economy may have hit the bottom, and could be on a rebound. That’s why geo-political issues have not negatively impacted on Alibaba.
Alibaba is also investing in new technologies such as blockchain, and AI, technologies that could help in improving ad efficiency and better product search results. This gives the company the leverage to keep growing its revenues in the long run, especially if the U.S. and China come into an agreement that ends the trade war. Besides, the company is looking into ways of protecting itself from the adverse effects of the trade war. According to the company’s vice chairman, Joe Tsai, the company is looking to shield itself by sourcing for products outside the U.S. for its Chinese consumers.
Looking at the company’s charts, it has broken out of a minor consolidation phase, and pushed above a key resistance level on the 100-day MA, at $176.49. This is an indicator that bullish sentiment is on the rise in Alibaba. This bullish sentiment is confirmed on the 5-day chart, where Alibaba has been trading above the 50-day MA. If this momentum sustains, the next target for Alibaba could be at $182.61 on the monthly 50-day MA. This could largely be dependent on how the entire market performs, now that Alibaba is trading post earnings. If the market continues to show strength, Alibaba on the basis of its fundamentals could continue to gain.
Analysts too have a positive outlook of Alibaba going forward. In the last 2-years, several analysts have upgraded their forecast of Alibaba. The latest one is Argus, which has upgraded Alibaba to buy status. Others include Atlantic Equities that upgraded it from neutral to overweight. It’s an indicator that its fundamentals are right, and though markets are unpredictable, its chances of gaining in value are higher.