Alibaba stock price has remained on edge in the past few days as investors waited for the next actions from the incoming Donald Trump administration. It was trading at $85.10, up by about 6.2% from its lowest level this year. So, is BABA a good contrarian investment to buy?
Alibaba’s growth concerns remain
Alibaba, one of the biggest Chinese e-commerce companies, has been under pressure in the past few years.
Competition from the likes of JD and PDD Holdings has continued rising. At the same time, the Chinese economy has continued to slow, with the unemployment rate remaining above 5.1% and retail sales are not growing.
Alibaba is facing other challenges, including the ongoing trade conflict and protectionist policies between the US and China. These issues have impacted its cloud computing in that companies like NVIDIA and AMD have been barred from selling some chips to Chinese companies.
On the positive side, the Chinese government has supported China’s technology companies by ending some investigations. There are also signs that the stimulus measures announced by Beijing have started to bear fruits.
Last week, China’s statistics agency said that the economy expanded by 5.4% in Q4, bringing the full-year growth rate to 5.0%. These numbers were much better than what most analysts were expecting.
Therefore, the Chinese economy will likely do well this year unless a trade war with China escalates.
The most recent financial results showed that its income from operations rose by 5% to 33.58 billion RMB. A 5% growth rate was significantly smaller than the double-digit one that other similar firms like Amazon made.
Alibaba’s ner income rose by 63% to 27 billion RMB during the quarter. Most of its revenue growth was from the international digital commerce segment whose revenue rose by 29% and its local services group whose revenue jumped by 14%.
BABA cloud computing concerns remain
Alibaba has copied Amazon’s business model by launching its cloud computing business. While Amazon is known for its e-commerce solutions, its AWS solution is the most profitable and less volatile.
AWS has the biggest market share in the cloud computing industry, powering most other companies that you know.
Alibaba’s cloud computing is also a big part of its business, generating 29.6 billion RMB in revenue in the last quarter.
The challenge, however, is that the industry is highly competitive in China, with companies like Tencent, Huawei, Baidu, and JD Cloud competing for market share.
These firms largely do business in China, with many foreign companies relying on American cloud providers like Google, Microsoft, IBM, and Amazon. This explains why the business growth largely lags behind its American peers. Its third quarter revenue growth was 7%, while AWS, Azure, and Google Cloud having double digit growth rate.
Analysts are optimistic that Alibaba’s business will do well this year. The average revenue estimate is that its revenue growth in 2024 was 6% and that this year’s growth metric will be about 8%.
Read more: Alibaba stock rebound is elusive, but a comeback is coming in 2025
Alibaba stock price analysis
The weekly chart shows that the BABA share price has remained under pressure in the past few months. It has remained between the key support at $56.60 and resistance at $134 since 2022.
The stock has remained at the 50-week and 100-week Exponential Moving Averages (EMA). It has also formed a symmetrical triangle pattern. This triangle is nearing its confluence level, meaning that a breakout and breakdown will happen soon.
Therefore, at this point, Alibaba’s stock price will likely remain in this consolidation ahead of its earnings release in February. It will then either have a bearish or bullish breakout, with the key levels to watch being at $56 and $133.
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