(CTN News) – Having returned 24% over the past six months, Alibaba (BABA) appears to be on the verge of returning to its glory days. Currently trading at $85, BABA stock has increased by almost 50% since its low point of $58.
With China opening and relaxing its zero-COVID policy, investors want to know if Alibaba’s recent gains are not only sustainable, but also if there is still room for further gains.
Additionally, are these gains sustainable in the absence of clear fundamental improvements in Alibaba’s business?
When the Chinese e-commerce giant reports its fourth quarter fiscal 2023 earnings results before the opening bell on Thursday, investors will be looking for answers to these questions.
BABA stock may benefit from a recovering Chinese economy. In spite of this, China’s leading e-commerce and cloud service provider remains a shell of its former self.
There has been an intense round of regulatory scrutiny of big tech platforms in China, which has caused the stock to drop more than 70% from its previous highs. It appears that these headwinds are abating, and there may be an ideal time to bet on a long-term recovery, particularly in light of Alibaba’s treasure trove of $55 billion in cash and its consistently strong cash flow.
Due to the company’s diversified revenue sources within the country, as well as its cloud potential, it offers tremendous value at the present time.
Earlier this year, Alibaba announced plans to invest $1 billion over the next three years to increase its cloud computing capabilities.
Alibaba’s management has begun to prioritize the cloud as a critical component of long-term growth and profitability even though it is currently a small portion of its overall business.
On Thursday, the stock may continue to climb if Alibaba beats top- and bottom-line expectations and provides a positive outlook for the rest of the year and the next quarter.
During the three months ending March, Wall Street expects Hong Kong-based online retailer to earn $1.35 per share on $30.28 billion in revenue.
In the year-ago quarter, the company earned $1.18 per share on revenue of $28.35 billion, compared to $1.18 per share in the current quarter. In the full year, earnings are expected to rise 4.5% year over year to $7.7 per share, while revenue is expected to rise 5.7% to $125.29 billion.
Recently, the company partnered with layer-1 blockchain company Avalanche. In the opinion of John Wu, president of Ava Labs,
Alibaba Cloud has approximately 4 million customers and 10 million developers, which means that this partnership will provide Alibaba’s customers with tools that will allow them to customize, launch and maintain their own metaverse spaces on Avalanche’s blockchain platform.
On the basis of current fundamentals, Alibaba recently delivered a strong third quarter report that slightly exceeded analyst expectations on revenue and handily exceeded analyst expectations on earnings. The adjusted earnings per share for Q3 were $2.79, an increase of 14% over the prior year.
Revenues of $35.9 billion increased 2% year over year, exceeding expectations for a decline of 5.6%. Net income increased by 12% to $7.2 billion.
Alibaba’s fundamentals are still intact as evidenced by the numbers. Accordingly, the company has begun to benefit from China’s reopening, as evidenced by its $12 billion in free cash flow and $5.08 billion in operating income, which have increased by nearly 400% since the beginning of the year.
In the event that similar results are achieved in the subsequent quarters, Alibaba stock appears to be an attractive investment.