• Alibaba Cloud releases new proprietary servers and new processor chips.
  • Unimpressive earnings expected in next two weeks for many Chinese tech heavyweights.
  • BABA stock appears to be back in bearish trend.

Alibaba (BABA) shares rose 2.2% in Monday’s trade to regain the $160 foothold lost on Friday and end the session at $162.16. BABA price action in recent weeks has shown a series of lower highers and lower lows, which seems to confirm that Alibaba stock is still in a downtrend. At the time of writing, BABA shares are down 0.9% at $160.65 in the premarket.

Alibaba Stock News: lackluster upcoming earnings expected for entire Chinese tech sector

Ahead of fiscal Q2 results scheduled for November 18, Wall Street consensus has Alibaba reporting earnings per share (EPS) of $1.95 – 28% lower than the year prior – on revenue of just over $32 billion. That last figure should warm the hearts of some investors as it is a 36% gain YoY from the $23.5 billion reported in the same quarter last year.

Still, rival JD.com is expected to report a 71% drop in EPS, so Alibaba’s outllook seems somewhat rosier than its counterparts.

Additionally, there are other positive news items to take note of. These include Alibaba Cloud unveiling both new custom proprietary servers for use at its data centers and in-house designed Yitian 710 server chips. These technologies show that the ecommerce giant is also taking the hardware needs of its cloud clients seriously.

“Customizing our own server chips is consistent with our ongoing efforts toward boosting our computing capabilities with better performance and improved energy efficiency,” said Jeff Zhang, President of Alibaba Cloud Intelligence.

Alibaba Cloud also announced the construction of two new data centers in Thailand and South Korea.

With less than ten days before the next earnings results, Oakmark Global Select Fund mentioned BABA’s value profile in a dicussion of the fund’s third quarter results: “While the company faces near-term challenges from regulatory pressures and a slowing macro environment, we believe it is meaningfully undervalued relative to our estimate of its intrinsic value.”

BABA key statistics

Market Cap $439.6 billion
Price/Earnings 18.9
Price/Sales 3.6
Price/Book 2.8
Enterprise Value $393.6 billion
Operating Margin 13.7%
Profit Margin

19.3%

52-week high $319.32
52-week low $138.43
Short Interest 2.7%
Average Wall Street Rating and Price Target Buy 242.11

BABA Stock Technical Analysis: Where is the bottom?

Prior to last Friday, BABA stock spent six full sessions trading above $162.35, which was acting as a floor price. Friday, however, changed that by send BABA down to close at $158.73. This price was well under our pivot point of $161.88. Up until then, here at FXStreet we thought BABA price would bounce off the bottom of the ascending trend line of a wedge. This would expect to see BABA shares transcend the October 20 high of $182.35 and thus create a higher high.

Friday changed all that. Now it appears the series of daily lower highs and lower lows from October 22 will continue, possibly until better news flow envelops Alibaba or risk takers enter the market next week ahead of the November 18 earnings. With both the 9-day and 21-day moving averages above current price action, there is little support until $150.

To break out of this current rut, BABA stock needs to overtake the 9-day moving average at $164.40 to even become neutral. From there, closing above $170 will place it on a more bullish path ahead of earnings. The near term bullish target is still $182.35.

When BABA stock broke out of its descending price channel on October 7, it seemed a new day was dawning. One month later, positive prospects for the stock seem less certain. Still, do not forget about that $15 billion share buyback program.

BABA daily chart