Alibaba Crushes 4Q18 Estimates, Analysts Raise Price Target

Alibaba Crushes 4Q18 Estimates, Analysts Raise Price Target
May 8, 2018

Alibaba Group Holding Limited (Nasdaq: BABA), dubbed as the Amazon of China, reported fiscal 2018 fourth-quarter earnings that was 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 a strong organic growth in China, global commerce, improvement in 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 Initiaties.

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, 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 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 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 the 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 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.

Alibaba - Technical Analysis - 8th May 2018

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: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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