Alibaba Stock Forecast: BABA shares jump on metaverse investment

The dim news flow surrounding Alibaba (BABA) on Monday was pushed to the side on Tuesday after it was reported that it has created a new metaverse unit. The stock accelerated more than 4% after website Chinastarmarket.cn wrote that a new unit called Yuanjing Shengsheng has been set up to lead Alibaba's foray into the metaverse.

Before the news broke, Tuesday's open saw BABA shares shed another 0.5% after Monday's embarrassing story that Alibaba management had fired an employee who reported being raped by a co-worker on a business trip. After the story surfaced on Monday, BABA stock had dropped 2.3% to $122.24 but is now trading near $127.

Alibaba Stock News: Investing in the metaverse

The news of the e-commerce giant's new focus comes after major announcements by Nvidia, Baidu and Tencent this year have reoriented much of global mega-tech toward the metaverse. Facebook famously changed the name of its parent company to Meta Platforms just two months ago in a bid to become the new sector's leader.

Alibaba's own South China Morning Post reports: "Yuanjing Shengsheng’s creation comes just two months after Alibaba’s cloud gaming business group launched a new brand with a similar name, describing it as a platform for cloud gaming. Alibaba said at the time that the platform would offer free computing sources for small to medium-sized cloud gaming developers."

The Post additionally mentioned that a business intelligence firm named Qichacha found that Alibaba has been trademarking its various brands related to the metaverse such as "Taobao Metaverse" and "Ali Metaverse". The rumor is that Alibaba will launch its own metaverse applications for e-commerce and gaming.

The news has sucked the negative energy out of Monday's story that the company had fired a female employee who announced publically she had been raped by a co-worker and possibly a client. In the dismissal letter, the company said the employee had lied about the company and her case and made the corporation look bad. The story undergirds public perceptions that Alibaba was trying to silence the woman and cover up the case.

Alibaba will hold a virtual investor presentation on December 16 and 17.

BABA key statistics

Alibaba Stock Forecast: BABA needs to eclipse $130

BABA shares have been in consolidation mode in the low $120s for a week now. With the metaverse announcement, it is important that the stock breaks above $130. Failure to do so this week could send the stock back down to support at $109.

BABA's stock price reached a four-and-a-half-year low near $109 two weeks ago. As we wrote last week: "If BABA cannot close above $130 this week, and even then quickly run back to $140, we would expect BABA to once again retest $109."

To turn things around, BABA price action has to take the stock above the 21-day moving average, which currently sits at $133.63. The Moving Average Convergence Divergence (MACD) crossed over into positive territory on Monday, which typically signals a move higher in the stock price is beginning. To do so, however, the market will need to see better volume, which has recently diminished. The most recent five sessions have each seen fewer than one million shares trade hands.

BABA 1-day chart

The author owns shares in Alibaba.

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