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Alibaba Group Holding Limited (BABA) – basic stock analysis

BABA provides technology infrastructure and marketing reach to merchants, brands, retailers, and other businesses to engage with their users and customers. The company was incorporated in 1999 (Hangzhou). Our estimated price for the company is around 338 USD. Extremely positive and negative target price estimates range from 261 to 492 USD.

Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 1.62% and -1.56% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.82% and -0.77% . Yesterday´s return was only -0.77% , well below the first standard deviation. Our scoring is currently positive (1 ) for the month-on-month change and 3 for price indexation. This means that we are in a positive short-term phase of the cycle. Both scorings range from -3 up to 3 . The estimated cycles development based on our analytical systems is shown in the following chart.

BABA daily indexation Source: WALFIR

Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the 6 months and the yellow line the annual moving average. As we can see in the chart below, medium- and long-term MAs are still in bearish sentiment. However, the monthly MA could be an important support in event of a further decline.

BABA daily price development Source: WALFIR

Our estimated Earnings Power Value (EPV) is 349 USD and the Growth Value (GV) is approximately the same. The potential opportunity for growth is based on the value of EPV and % of reinvested earnings. NAV is represented by the Total Stockholders’ equity. The following chart uses the value from the last fiscal year.

BABA value estimation Source: WALFIR

We could use the average long-term ATR (Average True Range) obtained from daily data (3.15% ) to estimate Stop Loss orders for our positions. The current value is 2.98% , which is very close to the average. Approximately 90% confidence interval (return between -3.50% and 3.50% ) is shown in the histogram below by a red rectangle.

BABA daily return distribution Source: WALFIR

We could use the last decile of low to high returns (4.00% ) to estimate Profit Targets, as shown in the chart below.

BABA daily low to high distribution Source: WALFIR

The basic technical analysis points to a declining trend, as the market price has been creating lower lows and lower high since the end of 2020. Therefore, according to our estimate of intrinsic value, the market price is well below the negative (261 USD ) scenario. The positive scenario (492 USD ) estimates the intrinsic value at new historical highs. The last dynamic rebound, after a decline of almost 60% , began in the demand zone (green rectangle). The psychological level 170 along with the short-term moving average can also be a very strong technical area.

BABA basic technical analysis Source: TradingView

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...


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