Shares of Chinese e-commerce giant Alibaba (BABA) moved nearly 0.85% lower on Tuesday, underscoring the rough day for tech stocks across the board and marking another trading period where BABA refused to break above its 52-week range.
Nevertheless, Alibaba has been one of the hottest stocks on Wall Street this year, and the company's own forecasts have analysts and investors giddy about the potential for even more gains in the near future.
BABA has met some resistance at the top of its range, and some investors might be reluctant to buy any stock that is close to its 52-week high. However, Alibaba is not just any other company. This brand is not only a dominant e-commerce player in its own country, but it's also an exciting prospect for emerging markets and up-and-coming industry trends.
Let's take a closer look at some key metrics to get a better understanding:
As we can see, Alibaba has been an incredible growth story over the past several years, and the company has proven its ability to continue increasing its total revenue. At Alibaba's investor day earlier this month, company CFO Maggie Wu announced that management now expects revenue growth of 45% to 49% in the 2018 fiscal year-a revelation that reportedly drew "gasps of wow" from the audience of investors (also read: Here's Why Alibaba Stock Soared Today ).
Alibaba's latest earnings report shows us that the company is still bringing in the vast majority of its revenue from its core commerce business, but investors should note that its other units are growing rapidly. According to the earnings release , the company's cloud computing business grew 103% year-over-year, while its digital media and innovation initiatives divisions recorded growth of 234% and 88%, respectively.
Yes, just like its American e-commerce counterpart Amazon (AMZN), Alibaba's growth has been sparked by impressive growth in new initiatives like cloud computing and entertainment. Alibaba has also started targeting an international expansion, and although we likely won't see a U.S. push anytime soon, the company is targeting areas with plenty of potential (also read: Alibaba's Online Payment Arm Alipay Enters South Africa ).
Of course, we must remember that Alibaba is currently a Zacks Rank #1 (Strong Buy). Remember, the Zacks Rank is heavily influenced by earnings estimate revisions, so let's check out a quick snapshot of the revision activity we have seen for BABA recently:
Perhaps the most exciting thing to note here, especially for those who would be hesitant to buy a stock at its 52-week high, is the growth projections into the next fiscal year. This is a company that promises to maintain its shocking growth, and that is good news for buy-and-hold investors. However, we should note that the Zacks Rank is intended to be a one to three month indicator, so investors should keep an eye on Alibaba's next earnings report, which we expect to see on August 10. This could be a major catalyst for near-term trading.
Finally, let's take a look at some of the company's six-month charts to see if any interesting trends appear:
It's been a nice and steady ride higher for BABA over the last six months, and the stock has casually lingered above its mid-term moving averages for some time. We can note some evidence of resistance in the low-$140 range, but it is probably too early to declare this an outright trend. Furthermore, we can note that the OBV chart shows little volatility, and although there have been some day-to-day fluctuations, money has been flowing into this stock relatively uninterrupted.
The most interesting to look at here is the RSI chart, which is designed to signal "overbought" and "oversold" thresholds. Typically, once a bullish move has crossed above the 80 line, it is a sign that the stock has entered overbought territory. As we can see, BABA is hovering right at that threshold now. However, as with most technical analysis, we are looking for individual trends instead of set-in-stone rules. In this case, BABA seems to have proven that it can stick around that line consistently over time, which is a strong trait for a stock that as continued to move higher.
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