3 signs indicating the Alibaba stock price will soar again
The Alibaba stock price may be down around 50% over the past 12 months, but there are signs the worst could be behind the Chinese internet giant.
Alibaba’s first quarter results for 2022 delivered better-than-expected earnings and an improving outlook.
Here are three key points in the results that should give Alibaba investors a much needed confidence boost.
1) Alibaba management expects a strong start to Q2
While quarterly results releases are backwards-looking, during the Q1 results call Q&A, Alibaba’s chief executive office, Daniel Zhang shared some insight into how the second quarter is shaping up for the company.
“With regards to the recovery that we’re seeing in consumption trends, certainly on our platforms, we saw that following the period of April, May going into June, signs of recovery certainly appeared in particular with the recovery of delivery and logistics capabilities, the normalization of logistics,” said Zhang.
“And certainly, in this year’s 618 shopping festival, we saw very good performance with positive growth achieved for the quarter. And we continue to see this positive trend of recovery continuing through July, and we expect that July will be even better than June.”
2) Q1 revenue beat analyst expectations
Alibaba posted revenue of US$30.7 billion in the April-June quarter – which was around the same revenue generated during the same quarter in 2021.
Usually investors demand year-on-year revenue increases in so-called high-growth technology companies, but given the uncertainties surrounding the Chinese economy and the COVID-19 lockdowns in the country, this results was better than expected.
In fact, the average Wall Street analyst’s estimate had Alibaba’s revenue declining by 1.5%. So this result was seen as a beat.
3) Alibaba Cloud post strong growth
Asia Markets analyst, Aditya Raghunath, noted growth on Alibaba’s cloud business unit would be something to look out for in the Q1 results.
And it didn’t disappoint.
Revenue from the Cloud segment for the quarter was US$2,.6 billion, up 10% compared to the same quarter in 2021.
“Year-over-year revenue growth of our Cloud segment reflected recovering growth of overall non-Internet industries, driven by financial services, public services, and telecommunication industries,” said the company.
Like Microsoft’s Azure cloud business and the Amazon Cloud, Alibaba’s cloud business is seen as one of the company biggest future growth drivers, as demand for data storage across the world increases.
In recent days, electric vehicle manufacturer XPeng Motors has been the latest to announce it will partner with Alibaba to develop a data center for autonomous driving vehicle model testing.
Has Alibaba stock bottomed?
The company’s NYSE-listed stock currently trades at just below its 2014 listing price and more than 70% lower than the record highs seen in October 2020.
During a brutal period for investors, the company has been hit by a damaging anti-monopoly probe in China, audit battles involving U.S. authorities, delisting concerns, and supply chains issues resulting from COVID-19 lockdowns.
Trying to time the bottom for the Alibaba stock price is near impossible. But for the long term investor who is willing to navigate further short-term volatility, Alibaba’s current stock price could be seen as an attractive entry point.