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Post-Earnings Alibaba Opportunity & What To Watch In Amazon's Earnings Tonight
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Alibaba (BABA - Free Report) is the value needle in a haystack of stretched tech valuations. The stock has upward momentum on its side, and after a robust earnings report this morning, I wouldn't hesitate to jump on this long-term opportunity for the Amazon of the East.
China's challenging regulatory system flexed its muscles this November, and the subsequent disappearance of Jack Ma, catalyzing a cascade of year end sell-offs. Now BABA is headed back up towards $300, with China's economy surging into 2021 (the only country with a positive GDP in 2020), Ma's reappearance, and a very healthy Q4 earnings report.
The Earnings Report
The company beat analysts' estimates on every metric, with its leading cloud division turning an operational profit for the first time. This innovation-driven business continues to impress me, illustrating 37% topline growth with its proliferating cloud segment expanding by 50% year-over-year. Singles Day (11.11) was the biggest in history for the company, helping boost its topline to record levels.
BABA shares sold off 3% from these positive earnings, which appears to be a trend for the tech sector's highly anticipated year-end reports. Traders are buying the rumor of expected strong earnings, and when the great quarterly results are released, they are selling the news.
Amazon (AMZN - Free Report) is expected to report record sales in its Q4 earnings report after the bell today, and if its Asian counterpart is any indication of what is to come, I expect strong results. According to Zacks Consensus estimates, analysts anticipate AMZN to report an EPS of $7.05 on sales of $120.36 billion, which would represent year-over-year growth of 9% and 38%, respectively.
If recent tech earnings trends continued (buy the earnings rumor and sell the earnings news), I would hesitate to make any AMZN purchases going into this evening's earnings report.
The Big BABA Sell-Off
It started with Jack Ma's public criticism of the Chinese government and its financial system. Xi's communist regime did not appreciate the critique and retaliated in full force.
In the first week of November, Chinese officials suspended what was expected to be the largest IPO in public equity history. Ant Group is the shining star of China's fintech space, and Alibaba holds a 33% stake in this innovative financial behemoth.
Chinese regulators have been probing Ant's micro-loan business since the fintech powerhouse began preparing its shares for its public debut. Two days before the anticipated IPO, Ant's listing was suspended, citing a change in China's fintech regulations.
Then in the domino effect of Jack Ma's regretful critiques, regulators released draft-rules on Wednesday concerning anti-competitive behavior, seemingly targeting Alibaba. Leading to another share price drop off.
China regulators are sending a wake-up call to Jack Ma and the rest of the Chinese tech industry to who is running the show. Xi's administration felt that Jack Ma's economic influence (Alibaba & Ant Group) challenged the country's power and control.
The BABA Opportunity
At the end of the day, China has no intention of destroying its most profitable tech giant. This was more of a powerplay by Chinese regulators to remind its domestic tech titans who really holds the cards.
BABA shares whiplash sell-off has created a fantastic opportunity to purchase one of Asia's highest potential enterprises at a substantial discount. From a technical and fundamental point of view, this stock is a buy.
BABA is currently trading in a Fibonacci bound range between $265 and $252 (which you can see circled in red below). Today's earnings profit pull sent the stock tumbling down to its 50-day moving average at around $254.50, then quickly bounced back. This is a tremendous opportunity to buy BABA at a discount before it breaks out of its current range, and after the amazing quarter it just released, I'm not sure how long it will remain this low.
Alibaba has a cornucopia of digital products at its disposal, and it will use all of them to control and profit off the prolific digitalization occurring in Asia today.
The fact that the Amazonof the East (aka BABA) has not taken off like its western counterpart is baffling. Alibaba controls the e-commerce space (80% market share), the cloud-computing category (roughly 50% market share), and a 33% stake in the leading FinTech in the most populous and soon-to-be largest economy on Earth.
Alibaba is valued at less than half of Amazon despite producing substantially wider margins, greater profitability, and having a more extensive revenue growth outlook for the next couple of years.
BABA was undervalued before this end of year sell-off. Today the stock is a stronger buy than ever, with options activity pointing to a swift recovery and 15 out of 16 analysts calling this a buy today.
Final Thoughts
BABA still has a massive amount of upside potential waiting to be priced in. The Chinese economy is beginning to recover beyond pre-COVID growth rates, with Alibaba's digital technology being the centerpiece of this expansion.
Ant's IPO delay and the anti-competitive probe are just a small hiccup in Alibaba's tech dominance in the East. BABA's post-earnings drip presents us with a very savvy long-term buying opportunity.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Image: Bigstock
Post-Earnings Alibaba Opportunity & What To Watch In Amazon's Earnings Tonight
Alibaba (BABA - Free Report) is the value needle in a haystack of stretched tech valuations. The stock has upward momentum on its side, and after a robust earnings report this morning, I wouldn't hesitate to jump on this long-term opportunity for the Amazon of the East.
China's challenging regulatory system flexed its muscles this November, and the subsequent disappearance of Jack Ma, catalyzing a cascade of year end sell-offs. Now BABA is headed back up towards $300, with China's economy surging into 2021 (the only country with a positive GDP in 2020), Ma's reappearance, and a very healthy Q4 earnings report.
The Earnings Report
The company beat analysts' estimates on every metric, with its leading cloud division turning an operational profit for the first time. This innovation-driven business continues to impress me, illustrating 37% topline growth with its proliferating cloud segment expanding by 50% year-over-year. Singles Day (11.11) was the biggest in history for the company, helping boost its topline to record levels.
BABA shares sold off 3% from these positive earnings, which appears to be a trend for the tech sector's highly anticipated year-end reports. Traders are buying the rumor of expected strong earnings, and when the great quarterly results are released, they are selling the news.
Amazon (AMZN - Free Report) is expected to report record sales in its Q4 earnings report after the bell today, and if its Asian counterpart is any indication of what is to come, I expect strong results. According to Zacks Consensus estimates, analysts anticipate AMZN to report an EPS of $7.05 on sales of $120.36 billion, which would represent year-over-year growth of 9% and 38%, respectively.
If recent tech earnings trends continued (buy the earnings rumor and sell the earnings news), I would hesitate to make any AMZN purchases going into this evening's earnings report.
The Big BABA Sell-Off
It started with Jack Ma's public criticism of the Chinese government and its financial system. Xi's communist regime did not appreciate the critique and retaliated in full force.
In the first week of November, Chinese officials suspended what was expected to be the largest IPO in public equity history. Ant Group is the shining star of China's fintech space, and Alibaba holds a 33% stake in this innovative financial behemoth.
Chinese regulators have been probing Ant's micro-loan business since the fintech powerhouse began preparing its shares for its public debut. Two days before the anticipated IPO, Ant's listing was suspended, citing a change in China's fintech regulations.
Then in the domino effect of Jack Ma's regretful critiques, regulators released draft-rules on Wednesday concerning anti-competitive behavior, seemingly targeting Alibaba. Leading to another share price drop off.
China regulators are sending a wake-up call to Jack Ma and the rest of the Chinese tech industry to who is running the show. Xi's administration felt that Jack Ma's economic influence (Alibaba & Ant Group) challenged the country's power and control.
The BABA Opportunity
At the end of the day, China has no intention of destroying its most profitable tech giant. This was more of a powerplay by Chinese regulators to remind its domestic tech titans who really holds the cards.
BABA shares whiplash sell-off has created a fantastic opportunity to purchase one of Asia's highest potential enterprises at a substantial discount. From a technical and fundamental point of view, this stock is a buy.
BABA is currently trading in a Fibonacci bound range between $265 and $252 (which you can see circled in red below). Today's earnings profit pull sent the stock tumbling down to its 50-day moving average at around $254.50, then quickly bounced back. This is a tremendous opportunity to buy BABA at a discount before it breaks out of its current range, and after the amazing quarter it just released, I'm not sure how long it will remain this low.
Alibaba has a cornucopia of digital products at its disposal, and it will use all of them to control and profit off the prolific digitalization occurring in Asia today.
The fact that the Amazon of the East (aka BABA) has not taken off like its western counterpart is baffling. Alibaba controls the e-commerce space (80% market share), the cloud-computing category (roughly 50% market share), and a 33% stake in the leading FinTech in the most populous and soon-to-be largest economy on Earth.
Alibaba is valued at less than half of Amazon despite producing substantially wider margins, greater profitability, and having a more extensive revenue growth outlook for the next couple of years.
BABA was undervalued before this end of year sell-off. Today the stock is a stronger buy than ever, with options activity pointing to a swift recovery and 15 out of 16 analysts calling this a buy today.
Final Thoughts
BABA still has a massive amount of upside potential waiting to be priced in. The Chinese economy is beginning to recover beyond pre-COVID growth rates, with Alibaba's digital technology being the centerpiece of this expansion.
Ant's IPO delay and the anti-competitive probe are just a small hiccup in Alibaba's tech dominance in the East. BABA's post-earnings drip presents us with a very savvy long-term buying opportunity.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>