Alibaba Lower Pre-Market
Shares in Chinese technology company Alibaba are trading 1.62% lower pre-market on Monday. The company has been hit by recent headlines highlighting fresh threats from President Trump. Following Trump’s ban on Chinese app TikTok, the US premier has now warned that he could apply such measures to other Chinese companies including Alibaba.
During a press conference, Trump received questions over his actions against TikTok and whether he was planning any further actions, including a possible ban on Alibaba. He replied:
“Well, we’re looking at other things. Yes.”
Solid Q2 Earnings Beat
Alibaba reported a solid set of Q2 earnings. They posted earnings per share of $1.83 versus estimates of a $1.55 EPS. The company posted revenues of CNY 119.02 billion for the quarter ( $16.65 billion). This marks a 40% increase on the same quarter a year prior.
The company noted that the increase in revenues was driven by solid growth in the company’s Chinese commerce retail business as well as growth in its cloud business.
In terms of the breakdown of its four main businesses: core commerce, cloud computing, digital media and entertainment and innovation initiatives, commerce retails saw the biggest positive contribution, accounting for 64% of total revenues.
At CNY 75.79 billion, the sector saw a 40% jump on the same period last year. This was driven mainly by a surge in direct sale businesses, including Tmall Supermarket and Freshippo. Alibaba also noted customer management and commission revenues as playing a big role in the success of its core commerce business over the quarter.
Cloud computing also saw solid growth over the quarter. With revenues of CNY 9.3 billion, the business marked a 64% jump on the same quarter a year earlier. Digital media and entertainment saw revenues of CNY 7.3 billion. This marks a 23% increase on the same quarter a year prior. Innovation initiatives and others reported revenues of CNY 1.21 billion, marking a 14% rally year on year.
While the stock is showing resilience for now, if Trump’s threats gain traction and a ban on Alibaba is applied this could be very damaging for sentiment towards the stock. This will likely put an end to the post-lockdown recovery we have seen over recent months.
Alibaba Shares Caught In Range Near Highs
The rally in Alibaba shares saw price topping out around the 265.73 level, just shy of testing the long term trend line resistance running from 2015.
To the downside, price found support at a test of the 241.19 level, having remained in a range between the two level over the last 6 weeks.
Bearish divergence on the last test of 265.73 raises the risks of a double top. However, bears will nee to see a break of the 241.19. to confirm a bearish reversal.
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