China’s Singles Day Sends Mixed Signals for Alibaba Stock


It took just 16.5 hours on Nov. 11 for Alibaba (NYSE:BABA) to go over 215 billion yuan ($30.7 billion) in sales for 2019 Singles Day, the company’s annual 24-hour sale that makes Black Friday look like a training exercise. 

With Earnings on the Horizon, Alibaba Stock Is a Great Buy Now

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This ought to be great news for Alibaba stock. Yet, as I write this, BABA stock is down almost 2% in Monday morning trading. 

What gives? 

Well, for starters, Alibaba’s 2018 Singles Day saw revenues increase by 27% to 213.5 billion yuan ($30.7 billion in 2018 currency). The final tally in 2019 would have to hit 270.7 billion yuan or average hourly sales of 11.3 billion yuan over the entire 24-hour sale to generate the same increase.

Through the first 16.5 hours, Alibaba was averaging 13 billion yuan per hour, 46% higher than the hourly average in 2018. It finished the 24-hour period with sales of 268 billion yuan ($38.3 billion) for an hourly average of 11.2 billion yuan, 25.8% higher than a year earlier.

It’s hard to fathom investors’ mixed reaction considering it almost increased sales as much as last year from a more significant dollar value.

It is possible investors following Alibaba Group have other things on their minds. 

Alibaba Stock’s Hong Kong IPO

Alibaba is set to list on the Hong Kong Stock Exchange in late November. It’s hoping to raise as much as $15 billion from the cross-border secondary listing.

While the BABA listing would go far to calm anxious investors, the wounding of an anti-government protester Nov. 11 before the markets opened did not help overall goodwill. The Hang Seng index lost almost 3% Monday, its worst single-day performance since the end of July. 

Since the Hong Kong protests began in June, the Hang Seng has lost 1.3% compared to a 6% gain in the MSCI All-Country World Index over the same period. 

“We have had six months of local unrest which is having a real impact on companies and the economy,” said Jim McCafferty, Hong Kong-based head of equity research for Asia ex-Japan at Nomura. “Geographically agnostic investors will, therefore, favor geopolitically safer places like Japan.”

One of the reasons Alibaba is listing in Hong Kong is the potential threat of its stock being delisted in the U.S. The Trump administration has looked at ways to push Chinese stocks to the sideline, including imposing a direct ban against Chinese companies listed on U.S. stock exchanges. 

Given how many Chinese companies trade on both New York and NASDAQ, that seems like a bit of a long shot, but anything’s possible from an administration that has shown little regard for conventional thinking.

As I stated in August, any delay of a Hong Kong listing due to political unrest was unlikely to slow Alibaba stock over the long haul. Its fundamentals are too darn good. 

The Bottom Line on Alibaba Stock

InvestorPlace contributor Wayne Duggan did an excellent job explaining why BABA stock is primed for a big breakout in its share price. 

Part fundamentals, part technical analysis, Duggan concludes that several external headwinds, including a slowing Chinese economy, were keeping its share price stuck in neutral. 

However, between the cloud, e-commerce, and operating in the most robust economy in the world, Alibaba’s stock, in Duggan’s estimation, is bound to breakout. 

Up 35% year to date and 27% over the past year, I think it’s abundantly clear that BABA has gotten out of neutral.

In a few days, once investors have been able to shake off the latest bout of violence in Hong Kong, they’ll come to realize that Alibaba’s secondary listing in Hong Kong is indicative of a company that’s firing on all cylinders, not one that’s looking to raise more capital.

The signals might be mixed at the moment. By the end of November, that will change in a big way.  

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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