Alibaba Group Holding Limited (Nasdaq: BABA), dubbed as the Amazon of China, reported fiscal 2018 fourth-quarter earnings that were better than the most optimistic expectations of analysts. The market responded positively to the results by pushing the share price by nearly $12 to $195.35. Based on the facts provided underneath, we are expecting the stock to move up further in the days to come.
The eCommerce giant posted fiscal 2018 fourth-quarter revenues of $9.87 billion and non-GAAP earnings of $0.91 per share, surpassing Zacks estimates of $9.25 billion and $0.85 per share. Aided by strong organic growth in China, global commerce, improvement in the cloud business, and consolidation of Cainaiao Network, Alibaba recorded a 61% y-o-y increase in revenue.
Alibaba has four business segments, namely Core Commerce, Digital Media and Entertainment, Cloud computing, and Innovation Initiatives.
Core Commerce, which comprises wholesale and retail commerce market places operating in China and International commerce, posted a 62% y-o-y growth revenues to RMB51.3 billion ($8.20 billion). In particular, the China Commerce retail business, which accounts for nearly 65% of the total revenues, posted sales of RMB40.20 billion ($6.40 billion), an increase of 56% from the prior-year period. Strong growth in the new retail businesses and impressive performance of Tmall Import and Hema contributed to the growth.
Cloud Computing revenues jumped 103% to RMB 4.40 billion ($699 million). During 4Q18, Alibaba launched 316 new products and features, mostly based on artificial intelligence, security, and data management.
Digital Media and Entertainment revenues posted a 34% increase in revenues to RMB5.30 billion ($840 million). Value-added services provided by UCWeb and strong growth in subscription and advertising revenues from Youku Tudou contributed to a growth in revenues.
Innovation initiatives, which includes the YunOS operating system, DingTalk enterprise messaging, and AutoNavi, reported revenues of RMB988 million ($158 million), an increase of 8% y-o-y.
Mobile monthly active users (MAUs) improved 22% from the year-ago quarter to 617 million. An increase in the use of mobile devices by consumers to access Alibaba’s platforms contributed to the growth. At the end of the fourth-quarter, China retail marketplaces had 552 million annual active buyers, representing a growth of 22% from last year.
Alibaba ended fiscal 2018 with cash and cash equivalents of approximately RMB 205.40 billion ($32.70 billion).
Following the robust results, Hans Chung, an analyst at KeyBanc Capital Markets, maintained the overweight rating on Alibaba and raised the price target to 235, from 219. Chung expects the new retail initiatives to aid revenue growth in fiscal 2019.
Jason Helfstein, an analyst at Oppenheimer, raised the price target to 230, from 220. He has also issued an outperform rating to Alibaba. Ken Sena, an analyst at Wells Fargo Securities has also given an outperform rating, while raising the price target to 230, from 220 issued earlier.
Technically, the stock has broken the resistance at 191 levels. Furthermore, the oscillator of the moving average has turned positive. Additionally, the stock is also trading above its 50-day moving average. Therefore, we are expecting the stock to move up in the days to come.
In order to gain from the uptrend, we are considering investing in a call option. However, we may proceed further only if the stock of Alibaba trades near $195 in the equity market. Additionally, the contract offered by the binary broker should be active for at least seven trading days.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
