Alibaba (BABA) Stock | Long Term Buy Or Short Term Sell?

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Alibaba Group Holding Ltd (NYSE:  BABA)

Alibaba is essentially China’s version of eBay.  It is a company that allows consumers and businesses to buy and sell goods online through its website marketplaces.  The Alibaba Group has roughly the same amount of employees, revenue, and net assets as its American-born counterpart.  But Alibaba is so much more than a Chinese eBay.  With all of its subsidiary companies, side-projects, and diverse investments, Alibaba is starting to look more like a Chinese Google.  It all started with one fairly straightforward e-commerce website, but it has grown into a gigantic conglomeration of businesses with roots and a commanding market share in the world’s second largest economy (some 80% of all online sales in China use Alibaba’s sites as of September 2014).

Technical Price Action

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BABA is a fairly new addition to the US Stock Market, but I am willing to bet almost every investor knows something about the stock.  When the company went public on September 19th 2014, it burst onto the scene as the largest IPO in recorded history.  It surpassed the previous record set by Agricultural Bank of China Ltd. in 2010 by 13% with a $25 billion showing!  Shares were priced for the IPO at $68, but they opened on the exchange floor already up 46% at $92.70.  Just about two months later on November 13th, shares touched their all-time high of $120.  BABA has been on a fairly steady decline since that point.  $80 has been a strong level of support with that only breaking once at the beginning of May.  Shares perked up two days after that break when a strong earnings report was released on May 7th.  Shares climbed until they hit resistance at $95 on May 22nd, and they resumed selling off after that.  Tuesday saw the $80 support level break again and  new all-time lows were set at $76.21.  By the end of the day, however, share prices were within forty cents of the $80 support level again.

With shares so recently setting an all-time low, many would say this is a perfect time to invest.  Earnings have come in line with or slightly above guidance, albeit still only three earnings reports into BABA’s NYSE lifespan.  And the company has wasted no time imitating US internet giants like Google and Amazon with diversification and acquisition moves.  Alibaba has been busy investing in and building its mobile platforms and businesses as well as increasing its next-day delivery capacities.  Maybe Jack Ma is just trying to imitate Jeff Bezos?  And Alibaba recently announced a new venture to launch its own streaming video service called TBO to compete with sites like Netflix and Amazon.  Truthfully, Alibaba has invested all that IPO cash in just about everything under the sun including the next Mission Impossible summer blockbuster installment and emotional, humanoid robots they hope will someday become nurses.  From what it appears, it seems that Alibaba is trying to be the Chinese version of Google, Amazon, Netflix, and eBay all wrapped up into one.

What’s Next For BABA?

With such lofty plans and such an uncertain Chinese market these days, there is plenty of room for concern with Alibaba.  Via falling share prices since February, Wall Street has been expressing its concerns about Alibaba after credibility issues were raised by the Chinese government about some of the products being sold on its websites.  Investors were also disappointed two weeks ago when they learned that Alibaba is selling off its largest attempt to break into the US online shopping market.  After only a year in operation, Alibaba is throwing in the towel on its US shopping site “11 Main” and selling it to rival OpenSky.  And there are those that think Alibaba was too much hype all along rather than a game-changing internet company.  To compare Alibaba to its US counterpart eBay one more time, Alibaba’s trailing 12-month P/E ratio is 49x while eBay’s sits at 26x.

About Alibaba Group Holding Ltd

The Alibaba Group (or Alibaba Group Holding Limited) is a Chinese e-commerce company that started with the founding of Alibaba.com in 1999.  Since its founding, it has ventured into many fields including email hosting, mobile payment, cloud computing, and even football club ownership.  The IPO for BABA in the NYSE raised a record $25 billion in September 2014.

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