Alibaba Share Price Forecast December 2021 – Time to Buy BABA?

Shares of Chinese multinational technology company Alibaba (NYSE: BABA) are in the green today, after closing at $122.98 as of December 21^st (19:59 EST). BABA shares have decreased by some 60% since hitting all-time highs in October 2020. The company just held an analyst day in which the company laid out its plans to revive growth coming out in 2021.

Alibaba – Technical Analysis

Alibaba’s financial statement indicates a market cap of $315.068 billion with total assets worth $267.05 billion. Revenue for 2020 was at $105.80 billion with a profit margin of 20.96% compared to $73.16 billion in 2019.

Moving averages for Alibaba such as Exponential Moving Average (20)(127.78),  Simple Moving Average (20)(124.70), Exponential Moving Average (30)(133.25),  Simple Moving Average (30)(135.66) and Exponential Moving Average (50)(141.90) are indicating a sell action. On the other hand, oscillators such as Relative Strength Index (14)(41.78), Stochastic %K (14, 3, 3)(52.81), Commodity Channel Index (20)(−26.82), Average Directional Index (14)(34.20) and Awesome Oscillator(−19.18) are neutral.

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Recent Developments

Alibaba’s current strategy involves improving its e-commerce marketplaces that dominate China’s higher-tier cities. The plan involves increasing the number of “VIP” customers that pay for Alibaba’s 88VIP subscription. These VIP subscriptions only represent 50 million out of Alibaba’s 946 million monthly active users which management expects to double.  The company is also targeting more price-sensitive older customers how became more comfortable using e-commerce services during the pandemic.

Management has started upgrading hands-on services linked to items such as the installation of home décor.  To make its more digital ad system more efficient, management aims to use AI and automation. It will revamp and transform its digital ad system from a “product-based” ad system to a “business target-driven” system. The change will produce a 30% increase in ROI for advertisers, which will result in higher ad rates in the future.

Alibaba has also been busy investing in other sectors, with management highlighting new aggressive investment plans.  These include investments in lower-tier markets that gravitate toward Alibaba’s Taobao Deals & Taocaicai group-buying marketplaces. It has already increased 200% in that market to reach about 270 million out of a potential total addressable market of 600 million.

Alibaba’s growth has also been helped by its local services platform Ele.me, which is a restaurant food delivery platform. management believes that Ele.me will eventually deliver everything and anything to the home, along with AI recommendations for local services through its AMAP app.  Reports indicate that the company’s Cainiao logistics segment is also a growth centre that’s currently losing money. But Alibaba hopes that the introduction of more driverless delivery vehicles and pickup stations could lower labour costs and potentially bring this unit to profitability in the future. However, Cainiao grew 40% in the past half-year.

Should You Buy BABA Shares?

Investors interested in Alibaba should look at the company’s cloud computing opportunity. If we consider an adjusted EBITDA, it is the only new segment that is profitable right now. It also has market leadership in the sector, which management estimating that the Chinese cloud market will grow at a 42% annual growth rate in the next three years and a 37% growth rate in the next five years.

Alibaba shares are cheap at roughly 14 times this year’s earnings estimates. For investors,  the shares can make a good buy for those betting on the rebound of Chinese tech stocks. But they should look at management’s future plans and whether they are meeting them before buying the shares at the moment.

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