39% YoY Rise in Mobile Active Users Turns Alibaba Bullish

39% YoY Rise in Mobile Active Users Turns Alibaba Bullish
August 16, 2016

Bucking the trend, the Chinese ecommerce company Alibaba Group Holding Limited (NYSE: BABA) reported fiscal 2016 second-quarter earnings and revenue that beat the analysts’ estimates. Considering the 39% q-o-q growth in the monthly mobile active users and higher monetization when compared to non-mobile users, we believe that the share price will remain bullish in the third-quarter of fiscal 2016. On Monday, Alibaba closed at $97.17, down 1.10% from the prior close.

The Hangzhou, China-based company reported second-quarter revenue of RMB32.15 billion ($4.83 billion), up 59% from RMB20.25 billion in the similar period of 2015. The quarterly revenue surpassed the analysts’ estimate of RMB30.1 billion ($4.54 billion).

The company founded by Jack Ma also revealed its segment wise revenue for the first-time. During the quarter ended June 2016, total core commerce revenue rose to RMB 27.24 billion ($4.10 billion), from RMB 18.54 billion last year. Cloud computing revenue grew 156% y-o-y to RMB 1.24 billion ($187 million). Digital media and entertainment revenue were RMB3.14 billion, up 286% from RMB812 million in the earlier year. Innovation initiatives revenue was RMB535 million, compared to RMB410 million in the corresponding period last year.

During the Q2 2016, the 17-year old company reported a GAAP net profit of RMB7.14 billion or RMB2.94 per share ($0.44), compared to RMB30.82 billion or RMB11.92 per share in Q2 2015. During the second-quarter last year, the company realized a one-time investment gain of RMB27.38 billion from Alibaba Pictures, the movie division of the company. That explains the 76% y-o-y decline in the quarterly profit this time.

Excluding items, the second-quarter non-GAAP earnings climbed to RMB12.19 billion ($1.83 billion), from RMB9.50 billion in the earlier year. The Q2 earnings per share of RMB4.90 ($0.74) were higher than the Wall Street estimates of RMB4.17 (or $0.63) per share. Alibaba reported Q2 2015 EPS of RMB3.68.

During the second-quarter, the Mobile Active Users (MAU) increased to 427 million, from 410 million in the quarter ended March 2016. The quantum of MAU at the end of second-quarter represents a 39% increase from 307 million MAU reported in the second-quarter of 2015. Thus, taking the strong fundamentals of the company into consideration, we forecast further uptrend in the share price.

For the past two years, barring two occasions, the stock was trading between 74 and 84. Finally, the surprisingly positive results enabled the stock to break above the resistance. The next hurdle for the stock, as per the historic price chart, exists at 105. The MACD is rising in the bullish zone.

Alibaba - Technical Analysis - 16th August 2016

Considering the overall bullish sentiment that exists towards the stock, we suggest picking up a one touch call option contract from a binary broker who is willing to offer a four week time period for the expiry of the contract. The strike price for the call option contract should not exceed $105 as well.


Andrew Wright

Prior to founding tradersasset.com 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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