Alibaba Q4 earnings: will Chinese tech giant’s share price keep falling further?

When to expect the earnings report?

Alibaba Group Holding Limited is estimated to reports earnings on 1 February for the fiscal fourth quarter Q4 ended in December, 2021.

What to expect?

According to Zacks Investment Research, based on 3 analysts' forecasts, the consensus EPS forecast for the quarter is $2.05. The reported EPS for the same quarter last year was $2.98.

Alibaba share price review

The Chinese tech behemoth has been on a roller coaster all through the course of 2021 after the Chinese government began a series of industry-wide clampdowns since April 2021. Since then, the price of BABA has been skydiving from $225 to close at $118 on Dec 31st, nearing a 50% loss. While during the same time, S&P 500’s yearly return last year was 37%, Nasdaq gained 21.4%.

A big miss in Q3 earnings and the delisting of DiDi was another two key events to stumble online retailer giant recently. Alibaba experienced one of its worst days following the Q3 earnings in November with a jaw-dropping 11% intraday drop. The company’s long-term profitability became the most significant concern for its shareholders as its most profitable sector’s (commerce) margin decreased from 35% in the quarter ending 30 September 2020 to 19% a year later.

Too cheap to be ignored?

BABA's current valuation is only about 16x PE with a 20% growth rate, thus the PEG ratio is less than 1. In other words, the current price for BABA is already on the "Boxing day sale".

Charlie Munger, 50-years partner of Warren Buffet, doubled his stake in Alibaba first in 2021 Q3 and doubled it again in Q4. The move seemingly serves as a great example of the half-century investment legend's famous quote: "when a great company gets into temporary trouble, we want to buy them when they're on the operating table."

However, if investors are looking to follow Mr Munger's path, the keyword is "temporary trouble". Despite the considerable challenges (i.e., inflation, supply chain, and tightening monetary policy) that many US tech companies continue to face, China's online conglomerate certainly has a longer list of "troubles". Chinese government's fast-changing policy, the slowing down of the Chinese economy, and the trade battle between the US and China may see Alibaba follow its peer DiDi's delisting path…. None of them is safe to be called a "temporary".

Technical Analysis

Based on the daily chart, BABA’s share price has been skewing into the downside trajectory formed since early 2021.

Current support can be found at $111, the level back to September 2016. A broken of this level will send the price to test as low as $88. On the other hand, the 20 days moving average at around $124 will be the crucial resistance for the price to fight for if BABA looks to re-challenge the high this year at $131. RSI indicator, from the weekly chart, shows the descending of the highs, is supporting a mid-term bear view.

Daily chart

Weekly chart

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