Alibaba Stock Forecast: BABA stock breaks below $130 in premarket
- BABA stock is trading at four-year low.
- Goldman Sachs removed it from its Conviction Buy List.
- The RSI shows an oversold reading for Alibaba shares.
Things are not going well for Alibaba (BABA) shares. The stock dropped below the critical $130 level in Tuesday's premarket as institutional investors continue to give up on yesteryear's Chinese wunderkind. BABA shares are now trading at a four-year low.
Alibaba (BABA) Stock News: Goldman downgrades its golden boy
Famously, Goldman Sachs bought about one-third of Alibaba back in 1999 when it was a lowly startup. In 2004 it sold the stake for $22 million, which amounted to nearly a seven-bagger. Of course if it had held the shares until today, even after Alibaba stock has dropped 60% from its all-time high last year, that stake would amount to $117 billion or about 92% of Goldman Sachs' current market cap.
On Monday, Goldman analysts removed BABA from its Conviction Buy List. The stock has underperformed massively in 2021 due to Chinese govenment scrutiny, as well as the Chinese Communist Party strong-arming the ecommerce giant into spending an additional $15.5 billion on political initiatives. Goldman cut its price target from $252 to $215 – still meaning the investment bank sees 65% upside in the BABA price.
The recent quarter's earnings also left the market wanting. The revenue estimates were revised down from about 29.5% YoY growth to between 20% and 23%.
Out of 52 analysts covering Alibaba, 36 have cut their stock price targets since Alibaba reported their Q3 earnings report, according to FactSet, but 47 of those analysts expect a bullish outlook.
BABA key statistics
| Market Cap | $359 billion |
| Price/Earnings | 19 |
| Price/Sales | 3 |
| Price/Book | 2 |
| Enterprise Value | $311 billion |
| Operating Margin | 13% |
| Profit Margin |
15% |
| 52-week high | $319.32 |
| 52-week low | $130.55 |
| Short Interest | 2% |
| Average Wall Street Rating and Price Target | Buy 212.41 |
Alibaba (BABA) Forecast: Relying on 2018 for support
Since BABA stock broke through the $140 support level on November 18 due to lacklustre earnings, the stock gently descended over the following week in what looked like support at $130. Since some sales happened in the high $129s in Tuesday's premarket, all bets are off.
This area also acted as support in October and December 2018. This means the support may yet hold up. If not, there is no sold ground below $130 until $109, an area that acted as resistance all the way back in September and October of 2016.
That we are searching for support five years ago says all that needs to be said about BABA's weakness. The Relative Strength Index (RSI) sits at 32 on the weekly chart below, just above oversold. The Moving Average Convergence Divergence (MACD) has once again crossed lower after giving a positive reading in October. It seems BABA wishes to close out the year as it began – under a cloud of doom.
BABA 1-week chart
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Author
Clay Webster
FXStreet
Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.
