Alibaba is Getting Strong

Information is not investment advice

Alibaba has raised its buyback to $25 billion as crackdowns ease and due to that, its shares jumped more than 11%, the highest in about a month.

Why is it interesting?

Until recently, Chinese technology corporations have rarely resorted to large shareholder return programs such as dividends or share buybacks. However, the country's largest corporations have resigned themselves to a new era of cautious expansion, after nearly two years of brutal internet repression that quickly swept everything from e-commerce to taxi bookings and online education.

Alibaba has increased its buyout arsenal for the third time since the tech crackdown began in Beijing in late 2020 — twice in less than a year. It purchased $56.2 million of the US depository shares in a previously announced share buyback program for approximately $9.2 billion. It means it has spent more on buyback than any other tech firm has since the sector's downturn began. However, this did little to increase the fortunes of the shares.

Additionally, the company is facing increasing competition from other e-commerce groups like Pinduoduo and JD.com and emerging platforms including ByteDance's Douyin, as well as a TikTok subsidiary in China that allows influencers to sell products via streaming content. In addition, Alibaba was fined a record $2.8 billion last year for abusing its market power.

What’s happening lately with Alibaba?

Shares of Alibaba Group Holding Ltd. rose 13% on Tuesday in New York after the company boosted its share-buyback program to $25 billion, raising hopes that Beijing is easing an online crackdown that has wiped out $470 billion of the e-commerce giant's value. The board of directors has approved the program, which will run for two years until March 2024, the company said in a statement.

Alibaba's increased buyback represents one of the largest programs to reward shareholders in China's giant internet industry. It also coincides with a reassessment of sentiment after Xi Jinping and his deputy, Liu He, vowed to support the economy and markets and stop the crackdown on the tech sector "as soon as possible", which triggered a historic rise in Chinese stocks.

What to wait for?

Growing geopolitical risks associated with Russia's invasion into Ukraine, the US moves to start the process of delisting Chinese stocks in New York, and the intensifying Covid outbreak on the mainland have also fueled market volatility in recent weeks. However, Chinese e-commerce group hopes to boost the investors’ confidence after a slowdown in growth and a crackdown in the tech sector, sending the company's stock to a multi-year low of $73.28.

Now, the current relatively low share price has attracted high-profile value investors such as Berkshire Hathaway vice chair Charlie Munger. Still, the company has yet to overcome the skepticism of many Wall Street analysts. On March 22, Alibaba shares closed at their near-month high in Hong Kong, while the US depositary receipts traded at $113.66 at 9:47 am in New York. Technically, the price should get above $120 to reverse the downtrend.

To sum up, despite various obstacles, it seems that Alibaba can cope with them. According to the latest earnings report, Alibaba's operating cash flow remains very attractive and robust, exceeding $30 billion a year.

FBS Analyst Team

More by this author

Similar

18.04.2023 18:29 Top Stocks to Trade this Earnings Season

The S&P 500 had a good week due to the impressive start of Q1 earnings and favorable inflation data. In March, the consumer price index rose 5%, lower than the previous month's 6%, and met economists' expectations.

fundamental analysis market forecast technical analysis stocks market usd forex signals

10.04.2023 13:49 FAANG stocks. Fundamental analysis.

FAANG stocks started recovering. Which ones are the best according to fundamental analysis?

stocks market s&p500 facebook

17.02.2023 12:51 Top Stocks to Invest in in 2023

The previous year 2022, was undoubtedly tumultuous for the stock markets, with several stocks plummeting across multiple industries. Analysts have blamed the hard times on inflation, hawkish federal reserve policies, an impending global recession, and the ongoing crisis in Ukraine. This year, however, we're beginning to see some recovery in the stock markets. This article will find a few stocks worth buying this year.

fundamental analysis market forecast technical analysis stocks market usd forex signals

Hold onto your hats, folks! The Japanese yen took a nosedive after the Bank of Japan (BOJ) left its ultra-loose policy settings unchanged, including its closely watched yield curve control (YCC) policy. But wait, there's more! The BOJ also removed its forward guidance, which had previously pledged to keep interest rates at current or lower levels. So, what's the scoop? Market expectations had been subdued going into the meeting, but some were still hoping for tweaks to the forward guidance to prepare for an eventual exit from the bank's massive stimulus

fundamental analysis market forecast jpy - japanese yen technical analysis usd forex signals aud - australian dollar

Share with friends:

Choose your payment system

Phone number

Select the best time for us to call you.

Select the best time for us to call you. We give calls from Monday to Friday in suggested intervals. In case we couldn't get through, we will try again at the same time the next day. For getting real-time assistance, use FBS chat.