Alibaba
The most immediate concern is that the quarantine and large parts of the country have been shut down which has impacted the company's ability to make deliveries and the companies' partners' production schedule. There is no clear timeline on when things will get back to normal. Overall while the coronavirus will have a near-term impact on Alibaba's earnings, it's unlikely to have a long-term impact, other than accelerating the shift to spending online.
Inside the Numbers
Alibaba reported earnings per share of $2.61 per share which beat analysts' estimates of $2.27 per share. Total revenue rose 38% from the third quarter of the previous year to $23.19 billion which beat analysts' estimates of $22.87 billion.
Cloud computing revenue came in at $1.5 billion which was a 62% gain. Alibaba's Singles Day promotion was also a smashing success with $38.379 billion in 24 hours which topped the $30.8 billion total in 2018.
Stock Price Forecast
Alibaba is the largest Chinese technology company. Thus, it will certainly see muted results in upcoming quarters if the Chinese economy slows. However, investors don't believe it will have a meaningful impact on the company's earning power and are using the company's weakness to buy shares as it's made up its opening losses.
Alibaba's stock is nearing a decisive breakout to new, all-time highs. Year-to-date, the stock is up nearly 5%. It's up 25% from early-October when it finally started to outperform the major averages. Since its bottom in late-December, it is more than 70% higher. Stepping back from a longer-term perspective, it's clear that the stock has been in a more than two-year consolidation since early-2018 when it topped around $206.
This is when the trade war first started, and the Chinese stock market began to underperform. Traders should consider getting long the stock with a stop-loss around $200. They can consider adding shares if the stock makes a new high above $230.
