Alibaba shares tumble in pre-market trading as Q4 earnings fall 89%

US shares of Chinese e-commerce and technology group Alibaba Group Holding fell over 2.0% in pre-market trading shortly after Q4 and full-year financial results were announced on Friday 22 May 2020.

As at 08:45 ET on Friday 22 May 2020, Alibaba’s American depository shares (ADS) are trading at US$208.33 per share, based on live IG estimates.

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Highlights from Alibaba’s Q4 financial results

Here are some things that stood out in the fourth quarter earnings for the three months ended 31 March 2020:

Positives

• Revenue was RMB114.31 billion (US$16.14 billion), an increase of 22% year-over-year
• Annual active consumers on China retail marketplaces reached 726 million, an increase of 15 million from the 12-month period ended December 31, 2019
• Mobile monthly active users on China retail marketplaces reached 846 million in March 2020, an increase of 22 million over December 2019
• On a company-adjusted non-GAAP basis, earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 1% year-over-year to RMB25.44 billion (US$3.6 billion)
• On a company-adjusted non-GAAP basis, diluted earnings per ADS was RMB9.20 (US$1.30), an increase of 7% year-over-year, while non-GAAP diluted earnings per share was RMB1.15 (US$0.16 or HK$1.26), an increase of 7% year-over-year

Negatives

• Income from operations was RMB7,131 million (US$1.01 billion), a decrease of 19% year-on-year, which the group said was ‘primarily due to the impact of the COVID-19 pandemic’
• Net income (or profit) attributable to ordinary shareholders was RMB3,162 million (US$447 million), a decrease of 88% year-over-year
• Net income (or profit) was RMB348 million (US$49 million), a decrease of 99% year-over year. The company attributed the year-over-year decrease to a net loss in investment income, mainly reflecting decreases in the market prices of our equity investments in publicly-traded companies, compared to a net gain recorded in the same quarter of 2019
• On a standard unadjusted GAAP basis, diluted earnings per ADS was RMB1.16 (US$0.16), a decline of 88% year-on-year
• On a standard unadjusted GAAP basis, diluted earnings per share was RMB0.14 (US$0.02 or HK$0.15) a share, an 89% year-on-year decline

Alibaba share price forecast: technical view

IG Asia market analyst Pan Jingyi noted that Alibaba shares 'have staged a strong rebound after plunging in March alongside the broader market'.

Although prices retraced significantly in April (over 6%), and continue to remain lifted going into late May, she cautioned that attempts at further upsides in the last two months had been stalled by a resistance zone established at around US$223 to US$235.

'A continuation of the long-term uptrend would require a convincing break above the resistance zone, one to watch for further triggers while momentum picks up,' Pan concluded.

Alibaba's US shares face resistance at around US$223 to US$253

How to trade Chinese tech stocks with IG

Are you bullish or bearish on Alibaba, Tencent, Baidu, JD.com and other Chinese tech titans' share prices? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs in a few easy steps:

• Create a live or demo IG Trading Account or log in to your existing account
• Enter <company name> or <ticket code> in the search bar and select it
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