Beast Finance Core Viewpoints:

(1) Alibaba's share price has risen by more than 65% from its lowest point this year.

(2) Alibaba's share price rise is mainly due to China's economic stimulus plans and regulatory easing.

(3) Alibaba's business faces many challenges, including cloud computing business.

(4) Beast Finance's technical analysis of Alibaba's share price: Alibaba's share price has now formed a cup and handle pattern on the weekly chart. Therefore, in the long run, the stock may continue to rebound and retest the key resistance level of $125.

Alibaba (BABA)'s share price has performed well recently (mainly due to the recent regulatory easing and the economic stimulus plans recently announced by the government and the central bank). On September 26, it even rose to a high of $117.7, which is more than 65% higher than its lowest point this year. This rise also made its market value exceed $250 billion for a time.

However, as the impact of the stimulus plans begins to fade, Alibaba's share price has recently started to decline and has given up some of its gains.

China's economic stimulus plans and regulatory easing

Driven by adjustments in policies by the government and its regulatory agencies, the share prices of Chinese stocks such as Alibaba, Pinduoduo (PDD), and JD.com (JD) have all risen significantly recently.

Last weekend, the Minister of Finance stated that the government is also preparing to introduce more economic stimulus measures, including expanding the deficit budget and providing more support to large technology companies.

In addition, the central bank has cut interest rates to zero and lowered the bank reserve requirement ratio, a move that will release billions of dollars in capital. Like Japan, Chinese regulators are also working to stimulate the stock market by introducing various favorable policies.

As a result, Goldman Sachs (GS) analysts have updated their outlook for the Chinese economy. They expect China's economic growth rate to reach 4.9%, up from the previous forecast of 4.7%. Furthermore, analysts anticipate continued growth in the Chinese economy next year.

Alibaba's business faces significant challenges

Despite these advancements, Alibaba's business still faces significant challenges as its core business faces intense competition, and most Chinese people prioritize debt reduction over consumption in the current economic climate.

Like Amazon (AMZN), Alibaba has invested in cloud computing and hopes it will become an important component of its business growth.

However, Alibaba's cloud computing business is now facing two major challenges. Firstly, it is competing with other highly valued companies such as Tencent (00700) and Huawei.

Secondly, the company's cloud computing business is primarily limited to the Chinese market, as western brands (such as Microsoft, Google, Amazon, etc.) dominate the top markets in Europe, Asia, and North America.

As a result, over the past few years, Aliyun has only maintained a 4% market share and still lags behind Amazon AWS, Microsoft Azure, and Google Cloud.

Alibaba's growth is slowing down

The latest financial report shows that Alibaba's growth has stagnated. In the quarter ending June 30, its revenue grew by only 4% to $33.47 billion. In comparison, Amazon's revenue grew by 10% to $148 billion during the same period, primarily driven by a 19% growth in Amazon's AWS business to $26 billion. In contrast, Aliyun's revenue grew by only 6% to $3.6 billion.

Rising costs have also reduced Alibaba's business profitability. Its net profit fell by 27% to $3.36 billion, while Amazon's net profit increased from $6.7 billion in the same period last year to $13.5 billion.

Therefore, management is hoping for continued global interest rate cuts to drive its growth.

In addition, Alibaba hopes that its large-scale share repurchases will help drive its long-term growth. The number of Alibaba's outstanding shares traded on U.S. stock exchanges has now fallen to 19 billion, a decrease of 445 million shares compared to March.

Currently, Alibaba's forward P/E ratio is 17.4, which is lower than the industry median of 18.7. On a non-GAAP basis, the trailing and forward P/E ratios are 12.

Currently, many Wall Street analysts are optimistic about Alibaba's share price. Of the 48 analysts covering Alibaba's stock, 47 have given it a "Buy" rating. The average target price is $117, which is higher than the current price of $101.840.

The most optimistic analysts currently covering Alibaba's stock are from Barclays, Baird, and JPMorgan Chase, while Macquarie analysts have recently upgraded their rating on Alibaba's stock from "Neutral" to "Outperform."

Technical Analysis of Alibaba's Share Price

The daily chart shows that Alibaba's share price had been rising, reaching a high of $117.10 earlier this month before falling back to $101.840. This rebound is consistent with Beast Finance's previous prediction.

The high price this month is significant as it coincides with the highest point in January last year.

However, the stock is still above the 50-day and 100-day moving averages and remains above the important support level of $100.

In addition, Alibaba's share price has now formed a cup and handle pattern on the weekly chart.

Therefore, in the long run, the stock may continue to rebound and retest the key resistance level of $125.

For more detailed fundamental and technical analysis of Alibaba's stock, or for a one-on-one in-depth analysis, please follow and contact Beast Finance.

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