Alibaba Signals Uptrend on Strong Mobile Revenue Growth

alibabaAlibaba Group Holding Limited (BABA) is a Chinese e-commerce company which has recently been making a difference. Even though their fiscal 2016 fourth-quarter earnings did not meet the expectations of the analysts, the continued growth in revenue and the significant boost in the mobile GMV (Gross Merchandise Volume) along with the increasing cloud computing revenue kept the stock in the spotlight. On Monday, their shares ended up at $79.41, increasing by 0.27%.

In the fourth quarter of 2015, the revenue of BABA was only RMB 17.425 billion ($2.74 billion) which grew up by 38.8% to RMB 24.18 billion ($3.8 billion) during the fiscal 2016 fourth-quarter. The analysts had just estimated revenue of $3.58 in the same year, so the revenues exceeded the expectations. The company’s net income for the fourth quarter was noticed to be RMB 5.314 billion ($824 million) while it was only RMB 2.87 billion ($450 million) in the fourth quarter of 2015.

When it came to the non-GAAP net income for the quarter which finishes on March, it was seen to drop from RMB 7.741 billion ($1.20 billion) in the fourth quarter of fiscal 2015 to RMB 7.635 billion ($1.184 billion), which is just 1%. Even though this minor decline was noticed in the non-GAAP net profit, the market participants hold high expectations about the company’s future ventures.

Alibaba CEO Daniel Zhang speech at the P&G Signal Conference

Economy and Stock

From the segment perspective, they had a retail market revenue of RMB 18.34 billion ($2.844 billion) which was about 41% higher on a Y-O-Y basis. And in the same way, on the same basis, an astounding growth was noticed on the mobile revenue; a whopping 149% to RMB 13.084 billion ($2.029 billion). The company has only recently joined the cloud computing business. This entrance did not hinder their growth in any way. Alibaba was able to make a 175% Y-O-Y based increase in their revenue, which went up to RMB 1.066 billion ($165 million). It is expected that by the end of the year 2018, the cloud computing business could bring in a revenue of over $1 billion.

Taobao, a mobile commerce application managed to gain a DAU (Daily Active Users)/MAU (Monthly Active Users) ratio of 40% in March. The GMV of the business to consumer (b2c) online retail platform called Tmall Global increased by 180% on a y-o- y basis.

Koubei, which is a joint venture service alongside Ant financial, managed to make a payment volume of RMB 21 billion ($3 billion) with all transactions being carried out via Alipay. This was seen in the fourth-quarter of fiscal 2016. The company spent $1 billion in April to purchase a controlling stake in Lazada, which is a well-known e-commerce platform favoured in South East Asia. After this acquisition, about 560 million customers from that particular region gained access.

By the end of fiscal 2016, the company’s free cash flow reached RMB 51.279 billion ($7.95 billion). Moreover, at the same time, the company also had 423 million active buyers in the retail marketplace of China, which was previously at 407 million in the fourth quarter of fiscal 2015. According to what the company claims, they could hit $1 trillion GMV soon. Therefore, it is safe to comprehend that the chances of the share prices going up are rather high. Alibaba’s share price seems to trade above the 50-day moving average, which is of 76.24. Moreover, the RSI indicator appears to be heading upwards as well, crossing the halfway mark last week.

Alibaba Stock Price

Alibaba Stock Price

Therefore, it would be sensible to BUY a (One-Touch) CALL Option Binary Option contract presently, as it is estimated that the next significant resistance for the stock would be 85. Major support is also indicated by the chart at 72.50.

Therefore, it is recommended that the chosen target for the trade should be below $85. Similarly, for the expiry period, a four-week period is recommended.

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