Jack Ma Makes Rare are Visit to Alibaba Headquarters in Hangzhou

The billionaire has kept an extremely low profile since delivering a speech in October in Shanghai criticizing China’s financial regulators, which set off a chain of events that led to the shelving of what would have been a record $37 billion initial public offering of Alibaba’s affiliate Ant Group.

On Monday, Ma was seen in an open-air campus shuttle bus with a number of Alibaba executives, according to a photograph taken by an employee at the event, viewed by Reuters. Wearing a blue T-shirt, white trousers and a pair of Chinese-style cloth shoes, Ma was smiling.

“It’s so exciting to see Jack,” said the employee, declining to be named.

“It’s a pity there was no chance to take a photo with him.”

China’s most famous entrepreneur, Ma enjoyed cult-like status among staff even after stepping down as chairman in 2019.

Ma, who is based in Hangzhou, disappeared from public view for three months before surfacing in January, speaking to a group of teachers by video, which sent Alibaba shares surging, but has not made any other public appearances since then.

Last month, regulators imposed a sweeping restructuring on Ant Group, while Alibaba was hit with a record antitrust fine of 18.2 billion yuan ($2.84 billion) after an investigation found it abused its market dominance.

($1 = 6.4110 Chinese yuan renminbi)

(Reporting by Sophie Yu and Tony Munroe; Editing by Susan Fenton)

Sell in May But Do Not Go Away…

During the different meetings last month, the various Central Banks, the Fed, Bank of Japan, People Bank of China, and the ECB left rates and policies unchanged as expected.

While the tone was quite optimistic on both sides of the Atlantic, Chairman Powell remained dovish and said the “time is not yet” to talk about tapering. Regarding inflation, Powell emphasized again that the Fed’s focus is on actual numbers and not on forecasts, and even if higher this year, the inflationary pressure should only be transitory.

However, last week Treasury Secretary Yellen shook the markets when she said that rising rates would be a necessary tool against an overheating economy. At the end of the day, the decision-maker regarding the rates is the Fed, but since Powell and Yellen are close, we may legitimately ask ourselves if they do not start questioning the inflation’s “temporary” nature.

During its meeting, the ECB said it would expect to lower bond purchases by the end of the year if vaccine rollout is improving and new variants do not represent a threat to the reopening.

In addition, the European Union plans to launch a Recovery Fund in June, under which it will issue a total of 800 billion EUR within five years, in order to support the post COVID economy.

The Central Banks in China, the US, and Europe are planning or checking a potential launch of a digital currency of their own – a move which may counter the original purpose of the cryptocurrency, a non-regulated coin.

Biden seems decided to finance his plans with tax hikes

In the US, President Biden seems decided to finance his plans with tax hikes: his $2.25 trillion infrastructure plan should be financed with an up to 28% corporate tax hike. He announced a $1.8 trillion children and families plan that should be financed with a tax increase as well. In addition, he proposed a capital gains tax hike from 20% to a 39.6% maximum rate for households making more than $1 million per year.

Of course, with a narrow majority in Congress, such increases will likely be compromised, but still, the tone is set, tax hikes will happen for corporates and for investors. An interesting and historical fact though: US markets tend to perform better in years of tax increases than during years of tax reduction. Food for thought…

On the vaccination side, Biden missed his target of 60% for the end of April. Nevertheless, even with 45% of Americans have received their first dose, restrictions are being eased all over the country. The new target is for 70% of Americans to get vaccinated by July 4th. In Europe, the vaccine rollout accelerated and as of today, 25% of Europeans have received their first jab. Israel is still a world leader with more than 62% of the population vaccinated.

April saw also the kickoff of the earnings season for Q1: so far 87% of the S&P 500 have reported, with 87% beating estimates. US major banks and giant techs reported extraordinarily strong numbers with good guidance, but little or no change was observed in their stock prices.

In the meantime, in China, regulators are focused on giant tech companies, and in this framework, Alibaba was fined $2.8 billion for breaking anti-monopoly laws, the largest amount ever imposed on a company. However, to put things in perspective, it represents only 2.5% of the forecasted revenue of the company for 2021 and the company accepted and complied with the charge without complaint. But for now, big Chinese stocks are under pressure mainly for that reason.

Virtual Climate Summit and the clean energy sector

Finally, a world leaders’ virtual summit on climate took place last month, organized by President Biden, hosting heads of states as well as philanthropists and activists on this matter. They all committed to efforts of lowering carbon emissions. This commitment has supported temporarily the clean energy sector. However, this sector is now suffering again, because of supply chain issues, despite actual good numbers.

Like automakers, renewable energy companies are being hit by the global chip shortage and by the cost of transport which has more than doubled this year. All that weighs particularly on solar energy companies that are in a period of development and investment.

From our side, as volatility and yields stabilize, and market movements on good news are contained, we tend to think that the recovery is now priced in and not much upside is left, at least in the short term. In this context, any bad news could have a strong and unexpected impact. However, for the midterm, two factors are incredibly supportive of the equity markets: first, the huge increase in dividend rates, even to above the pre-COVID levels, and secondly, the huge inflows into equity ETFs.

Indeed, inflows for the first quarter were the largest ever and more than three times the inflows during Q1 2020. If this trend continues, we could reach a total of $1 trillion cash brought to US equity ETFs by the end of the year, more than twice the actual record set in 2017. These facts tell us that there is plenty of money around and it mostly goes to one place, and one place only.

As always, risk management combined with rigorous sector and geographical diversification will remain key factors for investment performance.

You are more than welcome to contact us to discuss our investment views or financial markets generally.

For a look at all of today’s economic events, check out our economic calendar.

Earnings to Watch Next Week: Marriott, Electronic Arts, Alibaba and Walt Disney in Focus

Earnings Calendar For The Week Of May 10

Monday (May 10)

IN THE SPOTLIGHT: MARRIOTT

Marriott International, an American multinational diversified hospitality company, is expected to report its first-quarter earnings of $0.03 per share, which represents a year-over-year decline of over 88% from $0.26 per share seen in the same quarter a year ago.

The U.S. hotel operator’s revenue would slump about 50% to $2.36 billion. However, in the last quarter, the company has delivered an earnings surprise of over 20%.

“Largest hotel brand company globally creates economies of scale, but the spread of COVID-19 will pressure unit growth. With the stock trading near its historical average multiple, we see too wide a risk-reward to justify recommending, with upside/downside driven by how severe and quick business trends return to normal post-COVID-19,” noted Thomas Allen, equity analyst at Morgan Stanley.

Tuesday (May 11)

IN THE SPOTLIGHT: ELECTRONIC ARTS

Electronic Arts, one of the world’s largest video game publishers, is expected to report its fiscal fourth-quarter earnings of $1.04 per share, which represents a year-over-year decline of over 3% from $1.08 per share seen in the same quarter a year ago.

The world’s largest video game publishers would post revenue growth of about 15% to around $1.39 billion. However, in the last four quarters, the company has delivered an earnings surprise of over 500%.

“For the fourth quarter of fiscal 2021, EA expects GAAP revenues of $1.317 billion, cost of revenues to be $302 million, and operating expenses of $837 million. EA anticipates a loss per share of 7 cents for the fourth quarter. Net bookings are expected to be $1.375 billion, which indicates an increase of $75 million over the prior guidance. For fiscal 2021, EA expects revenues of $5.6 billion, cost of revenues to be $1.477 billion, and earnings per share of $2.54,” noted analysts at ZACKS Research.

Wednesday (May 12)

Ticker Company EPS Forecast
WEN Wendy’s $0.15
WIX WIX -$0.68
DT Dynatrace Holdings $0.14
WWW Wolverine World Wide $0.40
LITE Lumentum Holdings Inc $1.42
DOX Amdocs $1.13
JACK Jack In The Box $1.29
GOCO Gocompare.Com $0.00
SONO Sonos Inc -$0.22
PAAS Pan American Silver USA $0.30
MAURY Marui ADR $0.15
TM Toyota Motor $3.67
AEG Aegon $0.17
BRFS BRF $0.02
EBR Centrais Eletricas Brasileiras $0.27
BAYRY Bayer AG PK $0.73
TCEHY Tencent $0.53
DM Dominion Midstream Partners -$0.13
FLO Flowers Foods $0.37

Thursday (May 13)

IN THE SPOTLIGHT: ALIBABA, WALT DISNEY

ALIBABA: China’s Alibaba Group Holding, the largest online and mobile e-commerce company in the world, is expected to report its fiscal fourth-quarter earnings of $1.82 per share, up over 40% from the same quarter a year ago. China’s biggest online commerce company’s revenue to surge more than 70% to $27.7 billion.

“Heightened investments in Taobao Deal and Grocery for user acquisition in less-affluent regions in China, should support long-term growth in core e-commerce business. Merchants’ marketing budgets will continue to shift online given rising reliance on e-commerce and better conversion. Alibaba’s ad resources remain under-monetized,” noted Gary Yu, equity analyst at Morgan Stanley.

“Digitalization trend in China will also sustain AliCloud’s growth potential. Gradual margin expansion will be a long-term profit driver. We see limited near-term catalysts but F22e P/E valuation remains attractive. We also see further downside support from additional disclosure to separate losses from new investments from profitable core e-commerce businesses.”

WALT DISNEY: The world’s leading producers and providers of entertainment and information is expected to report its fiscal second-quarter earnings of $0.27 per share, which represents a year-over-year decline of over 50%. The Chicago, Illinois-based family entertainment company’s revenue would slump over 10% to $ 16.1 billion.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long-term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 13

Ticker Company EPS Forecast
CELH Celsius $0.00
HAE Haemonetics $0.69
BABA Alibaba $11.80
BAM Brookfield Asset Management USA $0.87
TAC TransAlta USA $0.06
UTZ Utz Brands $0.15
VERX Vertex Inc. Cl A $0.05
FTCH Farfetch -$0.28
DIS Walt Disney $0.27
AMAT Applied Materials $1.50
DDS Dillards $1.20
VNET 21Vianet -$0.02
TEF Telefonica $0.16
PBR Petroleo Brasileiro Petrobras $0.12
NICE Nice Systems $1.50
TYOYY Taiyo Yuden ADR $2.09
IX Orix $1.97
SGAMY Sega Sammy ADR -$0.02
SOMLY Secom ADR $0.27
OJIPY Oji ADR $1.57
SBS Companhia De Saneamento Basico $0.15

Friday (May 14)

Ticker Company EPS Forecast
MFG Mizuho Financial $0.06
CIG Companhia Energetica Minas Gerais $0.08
HMC Honda Motor $0.41
SMFG Sumitomo Mitsui Financial $0.12
RDY Drreddys Laboratories $0.52

 

Why Shares Of Alibaba Are Up By 8% Today?

Alibaba Video 12.04.21.

Alibaba Stock Gains Ground After A Record $2.75 Billion Fine

Shares of Alibaba gained strong upside momentum after Chinese regulators imposed a $2.75 billion fine on the company. Regulators accused Alibaba of violating anti-monopoly rules. The fine of $2.75 billion was calculated as 4% of the company’s 2019 revenues. Alibaba has already stated that it accepted the penalty and will comply with regulators’ demands.

Alibaba faced problems after Jack Ma criticized China’s regulators in October of 2020. Soon after Ma’s speech, IPO of fintech Ant Group was stopped, while Alibaba found itself under increased regulatory scrutiny.

Regulatory uncertainty put material pressure on Alibaba’s stock in 2021, and the company’s shares were down by about 4% year-to-date before today’s trading session despite the general bullish mood in the markets.

What’s Next For Alibaba?

The fine of $2.75 billion is not a material problem for a company with a market capitalization of more than $600 billion. In addition, the fine may mark the end of Alibaba’s problems, at least in the near term.

In this light, today’s strong performance of Alibaba’s shares is not surprising. Currently, the stock is up by about 8%, and it has decent chances to continue the upside move in the upcoming trading sessions.

Before the crisis with the Ant Group’s IPO, Alibaba shares were trading near the $310 level. If the market decides that the company’s problems are over, Alibaba shares will attract buyers who are willing to buy them at a significant discount to 2020 highs.

At the same time, traders will closely monitor news about Ant Group. China has recently directed Ant Group to register as a financial holding company, which will put it under regulation for financial companies. Jack Ma’s problems started after he stated that Chinese regulators hurt innovation, but now Ant Group will have to comply with stricter financial regulations.

For a look at all of today’s economic events, check out our economic calendar.

Why Shares Of Alibaba Are Down By 4%?

Alibaba 12.03.21.

Alibaba Stock Is Moving Lower As Regulatory Risks Increase

Shares of Alibaba found themselves under pressure after a Wall Street Journal report suggested that China’s regulators were ready to impose a record fine on the company for anticompetitive behavior.

Alibaba’s problems started when China’s regulators suspended the IPO of Ant Group. There were many reports about Jack Ma’s potential conflict with China’s leadership at that time, and Ant Group has been under material regulatory pressure ever since. Today, media reports indicated that the company’s CEO resigned, which may have contributed to pressure on Alibaba shares.

Concerns about the future of Jack Ma and his companies put significant pressure on Alibaba’s shares which were trying to settle above the $320 level before Ant Group’s IPO were cancelled.

The market is concerned with the continued pressure on Alibaba rather than with the fine itself. Chinese regulators have recently fined other big companies like Baidu and Tencent which indicated that regulatory environment became more hostile for big Chinese companies.

What’s Next For Alibaba?

Shares of Alibaba are currently trading at less than 20 forward P/E which is cheap for a company of this scale in today’s market.

However, traders need positive catalysts in order to focus on the company’s valuation. Right now, the market is worried about Jack Ma’s problems and also about the general regulatory trend for big Chinese companies.

In this light, any regulatory problems of other Chinese companies like the Tencent or Baidu may have a negative impact on Alibaba stock. If such problems emerge, Alibaba shares may gain additional downside momentum.

In the current market environment, Alibaba is attractive from the valuation point of view, but it remains to be seen whether traders and investors will be ready to use the current pullback amid risks of more conflicts with Chinese regulators.

For a look at all of today’s economic events, check out our economic calendar.

China’s Alibaba Beats Earnings Estimates; Target Price $387 in Best Case

China’s Alibaba Group Holding, the largest online and mobile e-commerce company in the world, reported better-than-expected revenue in the third quarter, led by a rapid recovery of China’s economy from the COVID-19 crisis and growth in e-commerce business due to the pandemic.

The multinational technology giant said its total revenue surged 37% to 221.08 billion yuan, beating the Wall Street consensus estimate of 214.38 billion yuan. Alibaba said its net income attributable to ordinary shareholders was 79.43 billion yuan, or 28.85 yuan per American depository share (ADS), up from 52.31 billion yuan, or 19.55 yuan per ADS, seen in the same period a year ago.

China’s biggest online commerce company said its diluted earnings per ADS was 28.85 yuan per share and non-GAAP diluted earnings per ADS was 22.03 per share, an increase of 21% year-over-year. That was also higher than the market expectations of 20.59 yuan.

In the December quarter, cloud computing revenue grew 50% year-over-year to 6.12 billion, primarily driven by robust growth in revenue from customers in the Internet and retail industries and the public sector.

However, the suspension of a $37 billion IPO of Ant Group pushed the Alibaba’s U.S.-listed shares about 3% lower to $257.88 on Tuesday.

Executive Comments

“We delivered another solid quarter, with revenue growth of 37% year-over-year and adjusted EBITDA up 22% year-over-year, while our strong free cash flow enabled us to further invest in strategic areas,” said Maggie Wu, Chief Financial Officer of Alibaba Group.

“We are pleased that our Alibaba Cloud business achieved positive adjusted EBITA during the quarter and Cainiao Network was operating cash flow positive. These progresses reflect our long-term approach to organically incubate and expand businesses from launch to profitability.”

Alibaba Stock Price Forecast

Twenty-three analysts who offered stock ratings for Alibaba in the last three months forecast the average price in 12 months at $324.56 with a high forecast of $387.00 and a low forecast of $270.00.

The average price target represents a 26.23% increase from the last price of $257.11. From those 23 analysts, 22 rated “Buy”, one rated “Hold”, and none rate “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $320 with a high of $375 under a bull scenario and $195 under the worst-case scenario. The firm currently has an “Overweight” rating on the mobile e-commerce company’s stock.

Several other analysts have also recently commented on the stock. Alibaba Group had its price objective cut by Deutsche Bank to $319 from $360. They currently have a buy rating on the specialty retailer’s stock. Sanford C. Bernstein assumed coverage and issued a market perform rating on the stock.

In addition, Robert W. Baird boosted their price target to $325 from $275 and gave the stock an outperform rating. Mizuho reduced their price target to $300 from $325 and set a buy rating. Loop Capital boosted their price target to $350 from $280 and gave the stock a buy rating.

Analyst Comments

COVID-19 has accelerated e-commerce penetration, especially in FMCG (fast-moving consumer goods), the next core category for e-commerce. Alibaba is set to benefit from this secular trend, given its leading position, and we expect it to maintain >50% market share over time, thanks to its strong ecosystem,” said Gary Yu, equity analyst at Morgan Stanley

“In addition, merchants’ marketing budgets will continue to shift online given the increasing reliance on e-commerce and better conversion. Alibaba‘s ad resources remain under-monetized. F2022e non-GAAP P/E is 19x, which we think is attractive given expanded addressable market for its e-commerce and cloud businesses. Profitability improvement in cloud serves as a key share price catalyst.”

Upside and Downside Risks

Risks to Upside: 1) Better core e-commerce monetization drives earnings growth upside. 2) Faster enterprise digitalization re-accelerates cloud revenue growth. 3) Stronger expansion of cloud margins -highlighted by Morgan Stanley.

Risks to Downside: 1) Intensified competition in less-developed regions would slow down GMV growth and pose downside to margins. 2) Lingering macro headwinds may pressure discretionary spending in China and affect our GMV and earnings forecasts.

Check out FX Empire’s earnings calendar

Three Big Tech Stocks Report Earnings This Week

Tech mega-caps highlight the last big reporting week of the fourth quarter earnings season, with Amazon.com Inc. (AMZN), Alphabet, Inc. (GOOG), and Alibaba Group Holding Ltd. (BABA) stepping to the plate. It’s a dangerous time for shareholders of these equity superstars, with market sentiment deteriorating at a rapid pace, following mind-boggling short squeezes on some of the U.S. market’s most downtrodden public companies.

FAANG members Apple Inc. (AAPL), Facebook Inc. (FB), and Netflix Inc. (NFLX) have all turned lower despite beating fourth quarter top and bottom line estimates, substantially increasing risk for GOOG and AMZN shareholders. Big investors getting margin calls could be driving this downturn, with losses incurred on high short interest small caps forcing involuntary liquidation. Main Street investors are also hitting the exits, worried that last week’s bizarre events will mark a major top.

Amazon

Amazon is expected to report a Q4 2020 profit of $7.00 per-share on $119.6 billion in revenue. The stock posted an all-time high at 3,552 in September and eased into a symmetrical triangle, with support near 2,870. It’s traded within this classic pattern for more than four months now, wobbling back and forth across the 50-day moving average. Unfortunately, monthly relative strength readings are still forecasting lower prices, raising odds for an eventual breakdown.

Alphabet

Analysts are looking for Alphabet to post a Q4 2020 profit of $15.99 per-share on $52.9 billion in revenue. The stock broke out above the September high at 1,733 in November and tested new support into January, when it broke out once again and posted an all-time high at 1,934. It’s now pulled back to support near 1,800, raising odds that a strong quarterly report will generate a fresh trend advance to new highs.

Alibaba

Finally, look for Alibaba to report a fiscal Q3 2021 profit of $20.94 per-share on $214.4 billion in revenue. The stock failed a rally above the 2018 high at 211 in February 2020 and recouped those losses into a July breakout that hit an all-time high at 319.32 in October. Many shareholders have jumped ship since that time, dropping accumulation to 18-month lows. It’s now hovering at the 200-day moving average and could roll over after this week’s confessional.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Earnings to Watch Next Week: Pfizer, Alibaba, Amazon, Alphabet and Qualcomm in Focus

Earnings Calendar For The Week Of February 1

Monday (February 1)

IN THE SPOTLIGHT: VERTEX PHARMACEUTICALS, NXP SEMICONDUCTORS, ON SEMICONDUCTOR

VERTEX PHARMACEUTICALS: The biopharmaceutical company is expected to report a profit of $2.55 in the fourth quarter, which represents year-over-year growth of 50% from the same quarter a year ago when the company reported $1.70 cents per share.

However, Wall Street forecasts the company’s revenue to grow about 12% to $1.58 billion.

“Q4 estimates for Vertex‘s CF franchise appear achievable based on recent trends. With industry-leading growth and its fundamentals largely intact despite COVID-19, we expect the current dislocation between Vertex Pharmaceuticals’ (VRTX) trading price and the value of its CF franchise to be only temporary. We would use the recent stock weakness to build a position,” said equity analysts at Cowen and Company, who also gave a price target of $300.

NXP SEMICONDUCTORS: Eindhoven, Netherlands-based semiconductor manufacturer will post earnings of $2.11 per share in the December quarter on revenue of $2.46 billion, up from $1.98 per share on revenue of $2.30 billion same quarter last year. For the December quarter, the forecasts revenue in the range of $2.375-$2.525 billion which, at the midpoint, represents growth of 8% sequentially and 6% year-over-year.

“Management remains upbeat about near-term demand, including 2021, especially regarding its mobile chip business as the firm’s ultra-wideband connectivity solutions are rapidly gaining adoption within newer smartphones. We raise our fair value estimate to $150 from $130, and with shares trading around $134, we view shares as slightly undervalued,” said equity analysts at Cowen and Company.

ON SEMICONDUCTOR: Phoenix, Arizona-based semiconductors supplier company will post earnings of $0.28 per share for last quarter of 2020. The revenue is expected to slump 3.0% on a year-over-year basis.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 1

Ticker Company EPS Forecast
TMO Thermo Fisher Scientific $6.52
OTIS Otis Worldwide Corp $0.59
RYAAY Ryanair -$1.11
ON ON Semiconductor $0.28
AEIS Advanced Energy Industries $1.34
ITUB Itau Unibanco $0.10
CACC Credit Acceptance $7.22
WWD Woodward $0.68
NXPI NXP Semiconductors $2.11
RMBS Rambus $0.25
ARE Alexandria Real Estate Equities $0.48
KRC Kilroy Realty $0.36
CRUS Cirrus Logic $1.86
OMCL Omnicell $0.80
KMPR Kemper $1.55
PCH Potlatch $1.37
KMT Kennametal $0.09
FN Fabrinet $1.04
IBTX Independent Bank $1.33
CBT Cabot $0.87
VRTX Vertex Pharmaceuticals $2.55
BKRKY Bank Rakyat $0.17
BECN Beacon Roofing Supply $0.63
LBRDK Liberty Broadband Lbrdk $1.06
IX Orix $1.95
RBC Regal Beloit Corporation $1.57
MFG Mizuho Financial $0.08

 

Tuesday (February 2)

IN THE SPOTLIGHT: PFIZER, ALIBABA, AMAZON, ALPHABET

PFIZER: The world’s largest pharmaceutical giant is expected to report a profit of $0.52 in the fourth quarter, which represents a year-over-year decline of about 5.4% from the same quarter last year when the company reported $0.55 per share.

The pharmaceutical company, which ranked 64th on the 2020 Fortune 500 list of the largest U.S. corporations by total revenue, will report revenue of $12.85 billion, up 1.3% from the year-ago quarter. According to chief executive officer Albert Bourla, Pfizer is likely to post this year’s earnings in the range of $3 to $3.10 per share.

“We lowered our 4Qe revenue by 5% from $11.6B to $11.0B and EPS by 6% from $0.40 to $0.38 to reflect lower doses delivered in 4Q. We lowered our 4Q COVID vaccine revenues from $683M to $150M (assuming $19.50/dose). Our prior model assumed 35M doses, which we lowered to 7.7M doses based upon CDC distribution allocations,” said David Risinger, equity analyst at Morgan Stanley.

“Our 4Q projections are well below consensus, but we do not see 4Q results as a stock driver given all of the confounding factors. We are instead focused on management’s 2021 targets.”

ALIBABA: The largest online and mobile e-commerce company in the world is expected to earn $2.65 per share for the third quarter, according to equities analysts at Oppenheimer. Oppenheimer also set EPS estimates for FY2021 at $7.48 and FY2022 at $9.33.

The Chinese multinational technology company has surpassed consensus estimates with an average of about 25% in all four previous quarters.

“We expect healthy GMV growth of 16% to drive core of core revenue growth of 18% on better monetization, but slower adjusted EBITA growth of 11% due to continued investment in new initiatives. Stay Overweight on F2022e non-GAAP P/E of 19x; lower price target to $320,” said Gary Yu, equity analyst at Morgan Stanley.

“We forecast total revenue of Rmb216bn (+33.8% YoY, +39.3% QoQ), non-GAAP EBITA of Rmb61.5bn (+21.4% YoY, +49.2% QoQ) with margin at 28.5% and non-GAAP net profit of Rmb57.2bn (+17.7% YoY, +16.1% QoQ) with margin at 26.5%.”

AMAZON: The eCommerce leader for physical and digital merchandise is expected to report a profit of $7.16 in the fourth quarter, which represents a year-over-year decline of over 10% from the same quarter last year when the company reported $6.47 per share.

The Seattle, Washington-based multinational technology giant will report revenue of $120.4 billion, up over 37% from the year-ago quarter. The company expects net sales between $112- $121 billion during the quarter.

Amazon‘s high-margin businesses continue to allow Amazon to drive greater profitability while still continuing to invest (last-mile delivery, fulfilment, Prime Now, Fresh, Prime digital content, Alexa/Echo, India, AWS, etc),” noted Brian Nowak, equity analyst at Morgan Stanley.

Amazon Prime membership growth drives recurring revenue and a positive mix shift. Cloud adoption hitting an inflection point. Advertising serves as a key area for both further growth potential and profitability flow-through.”

ALPHABET: The parent of Google and the world’s largest search engine, which dominates Internet search activity globally will post earnings of $15.68 per share for last quarter of 2020. The consensus mark for revenues is pegged at $44.09 billion, implying growth of 17.3% from the year-ago reported figure, according to ZACKS Research.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 2

Ticker Company EPS Forecast
HOG Harley Davidson $0.21
WAT Waters $2.87
ST Sensata Technologies $0.78
HUBB Hubbell $1.76
LITE Lumentum Holdings Inc $1.89
AMG Affiliated Managers $3.68
HAE Haemonetics $0.65
MAN ManpowerGroup $1.14
GPK Graphic Packaging $0.27
ABG Asbury Automotive $4.11
ATHM Autohome $9.54
MDC MDC $1.73
PFE Pfizer $0.52
XOM Exxon Mobil $0.01
UPS United Parcel Service $2.14
BP BP $0.08
HCA HCA $3.57
RACE Ferrari $1.24
EMR Emerson Electric $0.68
ETN Eaton $1.21
COP ConocoPhillips -$0.25
IDXX Idexx Laboratories $1.39
SYY Sysco $0.34
MCK McKesson $4.14
MPC Marathon Petroleum -$1.27
SIRI Sirius XM $0.06
MPLX MPLX $0.63
CTLT Catalent $0.55
BR Broadridge Financial Solutions $0.71
ENTG Entegris $0.66
TECH Bio Techne $1.37
BEN Franklin Resources $0.72
LII Lennox International $2.65
MMP Magellan Midstream Partners $0.85
BABA Alibaba $20.59
SANM Sanmina $0.81
MTCH Match Group $0.50
DOX Amdocs $1.14
MANH Manhattan Associates $0.32
POWI Power Integrations $0.44
MKL Markel $9.04
TENB Tenable Holdings Inc $0.05
FEYE FireEye $0.10
EPAY Bottomline Technologies $0.28
ATGE Adtalem Global Education Inc $0.67
MRCY Mercury Systems $0.51
BRKS Brooks Automation USA $0.42
GL Globe Life Inc $1.72
APAM Artisan Partners Asset Management $1.02
AMGN Amgen $3.39
CB Chubb $2.82
EA Electronic Arts EA $2.94
CMG Chipotle Mexican Grill $3.73
PKI PerkinElmer $2.95
STE Steris $1.52
AMCR Amcor PLC $0.17
FBHS Fortune Brands Home Security $1.16
ATO Atmos Energy $1.57
BCH Banco De Chile $0.31
AMZN Amazon $7.16
GOOG Alphabet $15.70
GOOGL Alphabet $15.68
SMFG Sumitomo Mitsui Financial $0.19
ASEKY Aisin Seiki Co $1.19
SNE Sony $0.80
RCL Royal Caribbean Cruises -$5.04
TDG TransDigm $2.09
IT Gartner $0.82
QGEN Qiagen $0.66
NPSKY NSK ADR $0.19
JKHY Jack Henry Associates $0.88
IPHI Inphi $0.88
SWI Solarwinds $0.25
BDC Belden $0.75
ILMN Illumina $1.10
BP BP £0.01

 

Wednesday (February 3)

IN THE SPOTLIGHT: QUALCOMM

QUALCOMM: San Diego, California-based multinational corporation that creates an intellectual property, semiconductors, software, and services related to wireless technology is expected to report a profit of $2.10 in the fiscal first quarter, which represents year-over-year growth of over 110% from the same quarter last year when the company reported $0.99 per share.

The semiconductor company will report revenue of $80.3 billion, up over 60% from the year-ago quarter.

“We see an improvement in smartphone demand in 2021 after declining 5% in 2020 due to COVID-19. We also see 5G adding greater dollar content and supporting industry-wide handset volume growth. Qualcomm’s (QCOM) leadership in cellular technologies (3G/4G/5G) puts the company in a favourable position to maintain leading market share,” wrote Joseph Moore, equity analyst at Morgan Stanley.

“The potential elimination of a major competitor in the Chinese market, HiSilicon, should benefit QCOM as Huawei currently does not pay royalties. To the extent competitors that do pay royalties are able to pick up market share, that would be beneficial for QCOM.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 3

Ticker Company EPS Forecast
ABBV AbbVie $2.85
LAD Lithia Motors $5.23
APTV Aptiv PLC $1.01
HUM Humana -$2.37
BIP Brookfield Infrastructure $0.10
HWM Howmet Aerospace Inc $0.17
GWW Grainger $3.84
SC Santander Consumer USA $1.10
BIIB Biogen $4.75
CHKP Check Point Software Technologies $2.11
LFUS Littelfuse $1.58
BSX Boston Scientific $0.31
DT Dynatrace Holdings $0.13
SPOT Spotify -$0.53
APO Apollo Global Management $0.50
INGR Ingredion $1.46
SMG Scotts Miracle-Gro -$0.77
CPRI Capri Holdings Ltd $0.97
MSGS Madison Square Garden Sports -$1.67
EVR Evercore Partners $1.93
EPD Enterprise Products Partners $0.50
SLAB Silicon Laboratories $0.74
ASH Ashland $0.69
MUSA Murphy USA $2.14
ALGT Allegiant Travel -$2.27
BSMX Santander Mexico Fincl Gp Sab Decv $0.14
CENTA Central Garden Pet -$0.01
RGLD Royal Gold Usa) $0.86
ALGN Align Technology $2.14
AXTA Axalta Coating Systems $0.43
THG Hanover $2.34
AFL Aflac $1.05
KLAC KLA-Tencor $3.18
MAA Mid-America Apartment Communities $0.59
GRUB GrubHub $0.07
AVB AvalonBay Communities $0.85
CTSH Cognizant Technology Solutions $0.90
VVV Valvoline Inc $0.37
RYN Rayonier $0.05
QCOM Qualcomm $2.10
LNC Lincoln National $1.92
MET MetLife $1.52
CTVA Corteva Inc -$0.05
UHAL Amerco $0.12
QRVO Qorvo $2.66
MXL MaxLinear $0.36
ANGI Angie’s List -$0.02
HI Hillenbrand $0.73
CCMP Cabot Microelectronics $1.73
UGI UGI $1.13
KLIC Kulicke And Soffa Industries $0.71
AFG American Financial $2.13
IEX IDEX $1.31
FORM FormFactor $0.39
EBAY eBay $0.83
MITSY Mitsui & Company $7.96
LGND Ligand Pharmaceuticals $0.99
RAMP Liveramp Holdings Inc $0.06
NVO Novo Nordisk A Fs $0.60
TMHC Taylor Morrison Home $0.82
AVY Avery Dennison $2.08
SAVE Spirit Airlines -$1.40
GSK Glaxosmithkline $0.62
IRBT Irobot $0.21
COTY Coty $0.09
PAG Penske Automotive $2.11
COHR Coherent $0.78
DTE DTE Energy $1.33
ENSG Ensign $0.79
FLO Flowers Foods $0.24
SKM Sk Telecom $0.22
IBA Industrias Bachoco Sab De Cv $0.63
NEU NewMarket $5.60
BBD Banco Bradesco $0.11
PYPL PayPal $1.00
NMR Nomura $0.18
BSBR Banco Santander Brasil $0.17
SAN Banco Santander $0.06

 

Thursday (February 4)

Ticker Company EPS Forecast
GPI Group 1 Automotive $5.94
ALXN Alexion Pharmaceuticals $2.58
NYT New York Times $0.34
BCE BCE (USA) $0.59
BMY Bristol-Myers Squibb $1.41
NJR New Jersey Resources $0.46
PM Philip Morris International $1.21
CMI Cummins $2.80
TPR Tapestry Inc $0.99
ARW Arrow Electronics $2.67
CMS CMS Energy Corporation $0.55
BAX Baxter International $0.75
YUM Yum Brands $1.01
CG Carlyle $0.44
CLX Clorox $1.77
AGCO AGCO $1.12
MPW Medical Properties $0.27
ABB ABB $0.18
JHG Janus Henderson Group PLC $0.73
CI Cigna $3.66
MMS Maximus $0.91
MRK Merck & Co $1.38
WEC Wisconsin Energy $0.73
XYL Xylem $0.68
TW Towers Watson $0.33
PENN Penn National Gaming $0.26
HSY Hershey $1.43
PH Parker-Hannifin $2.60
ICE Intercontinental Exchange $1.08
BSAC Banco Santander Chile $0.34
RL Ralph Lauren $1.64
SNA Snap-On $2.94
DGX Quest Diagnostics $3.98
ODFL Old Dominion Freight Line $1.57
COR CoreSite Realty $0.45
WD Walker & Dunlop $1.47
TKR Timken $0.92
IP International Paper $0.81
AME Ametek $1.03
BLL Ball $0.78
PBH Prestige Brands $0.77
ABC AmerisourceBergen $1.94
APD Air Products & Chemicals $2.18
LEA Lear $3.43
LANC Lancaster Colony $1.48
PTON Peloton Interactive, Inc. $0.08
SU Suncor Energy USA -$0.17
SKX Skechers USA $0.32
MTD Mettler Toledo International $8.72
PCTY Paylocity $0.25
ARWR Arrowhead Research -$0.22
SNAP Snap -$0.07
FTV Fortive Corp $0.62
NWSA News Corp $0.09
DECK Deckers Outdoor $7.06
EXPO Exponent $0.28
FTNT Fortinet $0.97
ALL Allstate $3.83
MDU MDU Resources $0.54
SYNA Synaptics $2.13
TDC Teradata $0.25
FLT Fleetcor Technologies $2.82
NBIX Neurocrine Biosciences $0.59
POST Post $0.71
CSL Carlisle Companies $1.16
NOV National Oilwell Varco -$0.14
GILD Gilead Sciences $2.01
WERN Werner $0.78
ESS Essex Property $1.02
CPT Camden Property $0.35
MPWR Monolithic Power Systems $1.24
WWE World Wrestling Entertainment $0.29
LPLA LPL Financial $1.33
OFC Orate Office Properties $0.38
ZEN Zendesk $0.15
MTX Minerals Technologies $0.91
PFPT Proofpoint $0.42
MSI Motorola Solutions Msi $2.74
COLM Columbia Sportswear $1.24
ATVI Activision Blizzard $1.17
F Ford Motor -$0.08
UNM Unum $1.19
HIG Hartford Financial Services $1.33
PRU Prudential Financial $2.57
DXC DXC Technology Co $0.54
KB Kb Financial $1.50
CHT Chunghwa Telecom $0.36
MCHP Microchip Technology $1.58
NWS News $0.09
AIV Apartment $0.67
SSUMY Sumitomo ADR $0.26
DB Deutsche Bank -$0.03
OHI Omega Healthcare Investors $0.41
KWHIY Kawasaki Heavy Industries ADR -$0.18
PFSI Pennymac Financial Services $5.90
TRNO Terreno Realty $0.37
BCO Brinks $1.04
VSAT Viasat $0.02
YAMCY Yamaha DRC $0.47
RDSA Royal Dutch Shell £0.17
NRZ New Residential Investment $0.33
RICOY Ricoh Company -$0.06
WYNN Wynn Resorts -$2.29
ITOCY Itochu ADR $1.87
TOT Total $0.46
MYGN Myriad Genetics -$0.12
BDX Becton, Dickinson and Co. $3.07
ARNC Arconic Inc $0.32
TM Toyota Motor $3.65
RHHBY Roche Holding ADR $1.28
CDW CDW $1.53
ARRY Array Biopharma $0.05
HL Hecla Mining $0.02
TWOU 2U -$0.10
ALNY Alnylam Pharmaceuticals -$1.88
DD DuPont $0.85
CARR Carrier Global Corp $0.37
OMVJF OMV $0.74
TPL Texas Pacific Land $4.54
AUOTY AU Optronics $0.27

 

Friday (February 5)

Ticker Company EPS Forecast
HRC Hill-Rom $1.05
ADNT Adient PLC $0.87
TT Trane Technologies PLC $0.92
LAZ Lazard $0.97
SNY Sanofi $0.69
EL Estée Lauder $1.68
LIN Linde PLC $2.16
AON AON $2.46
ZBH ZIMMER BIOMET HDG. $2.07
ITW Illinois Tool Works $1.79
REGN Regeneron Pharmaceuticals $8.23
CAH Cardinal Health $1.44
SPB Spectrum Brands $0.75
BERY Berry Plastics $0.94
HMC Honda Motor $0.75
NFG National Fuel Gas $0.99
CHBAY Chiba Bank ADR $0.77
SOMLY Secom ADR $0.26
ASX Advanced Semiconductor Engineering $0.12
BNPQY BNP Paribas ADR $0.55
FE FirstEnergy $0.50

 

Stocks Move Higher On Stimulus Expectations

U.S. Congress Certifies Biden Win

S&P 500 futures are gaining ground in premarket trading as traders managed to shrug off concerns about yesterday’s unrest in Washington. The U.S. Congress promptly certified Joe Biden’s victory in presidential election.

U.S. President Donald Trump stated that “there will be an orderly transition on January 20th”, and markets focused on the consequences of Democrats’ victories in Senate elections.

Traders expect that Democrats will soon introduce another stimulus package which should provide additional support to the economy and the stock market. The yields on U.S. government bonds continued to rally as investors sold their holdings in anticipation of another avalanche of freshly-printed dollars.

Surprisingly, the U.S. dollar gained some upside momentum against a broad basket of currencies, putting pressure on safe-haven precious metals like gold and silver. It remains to be seen whether the U.S. dollar will continue to rebound as stimulus expectations will likely serve as a bearish catalyst for the American currency.

U.S. – China Tensions Continue To Increase

According to recent reports, U.S. may add China’s tech giants Alibaba and Tencent to a blacklist, banning American investments in these companies. On Tuesday, the U.S. ordered a ban on transactions with eight Chinese apps.

In addition, Secretary of State Mike Pompeo stated that the U.S. may introduce new sanctions related to the recent arrests in Hong Kong.

The new escalation in U.S. – China tensions did not get much attention as traders watched the turmoil in Washington, but it may have longer-term implications, especially in case the U.S. bans Chinese tech giants from U.S. markets. At this point, the markets ignore the risks of another round of trade war between the world’s biggest economies, and stocks look ready to move to new highs.

Initial Jobless Claims Remain Unchanged At 787,000

The U.S. has just provided Initial Jobless Claims and Continuing Jobless Claims reports.

The Initial Jobless Claims report indicated that 787,000 Americans filed for unemployment benefits in a week compared to analyst consensus of 800,000. Meanwhile, Continuing Jobless Claims declined from 5.22 million to 5.07 million.

These reports look good in comparison with yesterday’s ADP Employment Change report which showed that private businesses fired 123,000 workers in December. However, traders will wait for the Non Farm Payrolls report which will be published on Friday to come to final conclusions about the current state of the job market.

For a look at all of today’s economic events, check out our economic calendar.

Alibaba Shares Slump to Six-Month Low Despite Proposed Rise in Shares Buyback

Chinese technology giant Alibaba’s shares plunged as much as 9.2% to a six-month low on Monday as the world’s largest online and mobile e-commerce company’s increase of a proposed stock buyback program to $10 billion failed to lift sentiments amid growing concerns about a regulatory crackdown on Jack Ma’s empire.

Alibaba upsized a proposed stock buyback by $4 billion to $10 billion, effective for two years through the end of 2022. This comes at a time when Chinese regulators are launching an antitrust investigation into China’s e-commerce leader and would summon Alibaba’s affiliate to meet in coming days.

“We expect that the fine amount may not be large this time, which aims to remind the Company to avoid improper acts in the future, and to avoid monopolistic behaviour which is prohibited by relevant anti-monopoly laws. It is possible for further anti-monopoly law investigations for the Internet sector to be conducted, resulting in short-term uncertainty across the Internet sector,” noted Danny Law, equity analyst at Guotai Junan  Securities in Hong Kong.

“However, we don’t think that Chinese regulators are aiming to resist the development of internet businesses in China. On the other hand, Chinese regulators are trying to deter inappropriate acts by Internet enterprises, pushing Internet enterprises to adjust their expansion strategies.  This move will help Internet businesses in China to grow healthily and adopt socially responsible practices, benefitting the whole society eventually,” Danny Law added.

Alibaba shares closed about 8% lower at HK$210 after plunging as low as 9.2% intraday on Monday. However, the stock is just up over 1% so far this year.

Alibaba Stock Price Forecast

On the U.S.-listed stock, 22 analysts who offered stock ratings for Alibaba in the last three months forecast the average price in 12 months at $338.47 with a high forecast of $365.00 and a low forecast of $290.00. The average price target represents a 52.53% increase from the last price of $221.90. All of those 22 equity analysts rated “Buy”, according to Tipranks.

Morgan Stanley gave a base target price of $345 with a high of $405 under a bull scenario and $208 under the worst-case scenario. The firm currently has an “Overweight” rating on the e-commerce company’s stock.

Several other analysts have also recently commented on the stock. Alibaba Group had its price target cut by Raymond James to $330 from $335. They currently have a strong-buy rating on the specialty retailer’s stock. Argus upped their target price to $330 from $260 and gave the stock a buy rating. Mizuho increased their target price to $325 from $300 and gave the company a buy rating. Nomura restated a buy rating and set a $309 target price. At last, Goldman Sachs Group increased their target price to $350 from $315.

Analyst Comments

“COVID-19 has accelerated e-commerce penetration, especially in FMCG (fast-moving consumer goods), the next core category for e-commerce. Alibaba is set to benefit from this secular trend, given its leading position, and we expect it to maintain >50% market share over time, thanks to its strong ecosystem,” said Gary Yu, equity analyst at Morgan Stanley.

“In addition, merchants’ marketing budgets will continue to shift online given the increasing reliance on e-commerce and better conversion. Alibaba’s ad resources remain under-monetized. F2022e non-GAAP P/E is 24x, which we think is attractive given expanded addressable market for its e-commerce and cloud businesses. Profitability improvement in cloud serves as a key share price catalyst.”

Alibaba Plunges After Regulators Suspend Ant Group IPO

Shares in Chinese tech giant Alibaba Group Holding Limited (BABA) shares plummeted 8.13% Tuesday after regulators suspended the Ant Group Co. Ltd initial public offering (IPO) over concerns the fintech unicorn failes to meet requirements for listing on the Shanghai Stock Exchange. Alibaba has a 33% stake in the IPO, which was set to list Thursday and raise more than $35 billion through concurrent listings on the Shanghai and Hong Kong stock exchanges, making it the largest IPO in history.

Shanghai officials said they had halted the listing amid concerns that the company was able to meet conditions relating to changes in the regulatory environment. “Your company has reported significant issues such as the changes in financial technology regulatory environment. These issues may result in your company not meeting the conditions for listing or meeting the information disclosure requirements,” the stock exchange said, per Investor’s Business Daily.

As of Nov. 4, 2020, Alibaba stock has a market capitalization of $763.81 billion and trades 34.64% higher on the year. Over the past three months, the shares have gained nearly 11%. Despite the stock’s recent price appreciation, the company still trades just 18.7% above its five-year projected earnings multiple of 27.53.

Meeting with Regulators

The shock decision comes just a day after the People’s Bank of China and exchange regulators interviewed Ant Group co-founder Jack Ma about the IPO. According to Reuters, officials raised their concern about Ant’s lending business that originates loans underwritten primarily by financial-industry partners. Chinese regulators are reportedly growing fearful that financial institutions may encounter rising defaults in the wake of the coronavirus pandemic.

Wall Street View

Raymond James analyst Aaron Kessler has maintained his ‘Strong Buy’ rating on the stock. He argues yesterday’s sell-off appears to be an overreaction given Ant Group’s $300 billion valuation.

Elsewhere on the Street, analysts remain overwhelmingly bullish. The shares receive 50 ‘Buy’ ratings, 4 ‘Overweight’ ratings, and 1 ‘Hold’ rating. Currently, no broker recommends selling the stock. Price targets range between $377.82 and $278.04, with the median 12-month consensus pegged at $336.50. This represents an 18% premium to Tuesday’s close of $285.57.

Technical Outlook and Trading Tactics

After bottoming out at $170, Alibaba shares have remained in a steady uptrend. However, yesterday’s decline below both a key seven-month trendline and the 50-day simple moving average (SMA) may trigger further short-term weakness in subsequent trading sessions.

Still, those intending to buy should look for entries near $266, where price encounters support from a crucial horizontal line. In terms of trade management, consider placing a profit target in the vicinity of last month’s high at $319.32. Protect capital with a stop-loss order positioned under the September low at $264.56.

Alibaba Posts Strong Q2 Revenue as COVID-19 Crisis Boosts Online Business; Target Price $290

Alibaba Group Holding Ltd, the largest online and mobile eCommerce company in the world, said its revenue surged 35% year-over-year in the second quarter, largely due to growth in core commerce and cloud computing businesses, which has been accelerated by the COVID-19 pandemic.

The Chinese multinational technology company said its Q2 revenue rose to 153.75 billion yuan, an increase of 34% year-over-year. Alibaba’s net income attributable to ordinary shareholders more than doubled to 47.59 billion yuan from 21.25 billion yuan.

Alibaba said its annual active consumers on China retail marketplaces reached 742 million, an increase of 16 million from the 12 months ended March 31, 2020. Mobile MAUs on China retail marketplaces reached 874 million in June 2020, an increase of 28 million over March 2020.

Net income attributable to ordinary shareholders was 47,591 million yuan, and net income was 46,437 million yuan. Non-GAAP net income was 39,474 million yuan, an increase of 28% year-over-year.

Alibaba’s shares traded about 2% lower at $158.28 on Thursday. However, the stock is up over 20% so far this year.

Executive comments

“We delivered a very strong start to our new fiscal year, with revenue growing 34% year-over-year and adjusted EBITDA growing 30% year-over-year,” said Maggie Wu, Chief Financial Officer of Alibaba Group.

“Our domestic core commerce business has fully recovered to pre-COVID-19 levels across the board, while cloud computing revenue grew 59% year-over-year. Our strong profit growth and cash flow enable us to continue to strengthen our core business and invest for long term growth.”

Alibaba stock forecast

Twenty-one analysts forecast the average price in 12 months at $278.05 with a high forecast of $316.00 and a low forecast of $216.00. The average price target represents a 6.70% increase from the last price of $260.59. From those 21 analysts, 20 rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley target price is $290 with a high of $344 under a bull scenario and $169 under the worst-case scenario. Alibaba Group had its price target increased by Truist to $242 from $240. They currently have a buy rating on the speciality retailer’s stock.

Other equity analysts also recently updated their stock outlook. Nomura restated a buy rating and issued a $309.00 target price on shares of Alibaba Group. Oppenheimer restated a buy rating and issued a $260.00 price objective.

Analyst view

“COVID-19 has accelerated e-commerce penetration, especially in FMCG (fast-moving consumer goods), the next core category for e-commerce. Alibaba is set to benefit from this secular trend, given its leading position, and we expect it to maintain >50% market share over time, thanks to its strong ecosystem,” said Gary Yu, equity analyst at Morgan Stanley.

“In addition, merchants’ marketing budgets will continue to shift online given increasing reliance on e-commerce and better conversion. Alibaba’s ad resources remain under-monetized. Our new target implies 25x F22e P/E, in line with the average since 2017. Despite its recent rally, BABA’s NTM forward P/E discount to Tencent is deeper than the historical average of 20% since 2017,” he added.

Upside and Downside risks

Upside: 1) Better core e-commerce monetization drives earnings growth upside. 2) Faster enterprise digitalization re-accelerates cloud revenue growth – highlighted by Morgan Stanley.

Downside: 1) Intensified competition in less-developed regions would slow down GMV growth and pose downside to margins. 2) Lingering macro headwinds may pressure discretionary spending in China and affect our GMV and earnings forecasts.

U.S. Stocks Set To Open Higher As Traders Bet On Continuation Of The Upside Trend

U.S. – China Trade Deal Review Got Postponed

The review of the Phase 1 trade deal between the world’s biggest economies got postponed as the U.S. had reportedly decided to provide China with more time to increase purchases of U.S. goods.

Not surprisingly, the coronavirus pandemic put some pressure on the implementation of the first phase of the U.S. – China trade deal which remains a rare bright spot in the current relations between the two countries.

The delay of the review is a positive development for the markets since it shows that U.S. is not ready to put more pressure on China on the trade front.

Additional time will provide Beijing with a chance to boost purchases under the deal. As a result, the review of the Phase 1 deal will look more favorable and allow both parties to stay on course for the Phase 2 deal in case the political situation permits new negotiations.

S&P 500 futures are gaining some ground in premarket trading as traders believe that the trade deal between U.S. and China is not in danger for now.

More Pressure On Chinese Companies?

While the news on the trade deal front are favorable for China and the world economy, U.S. – China relations continue to trend down.

On Saturday, U.S. President Donald Trump stated that he may put pressure on more Chinese companies after he decided to ban TikTok unless it would sell its U.S. operations. China’s technology giant Alibaba is a possible target.

At this point, it looks like traders believe that U.S. will not act against other Chinese companies before the November elections so shares of Alibaba find themselves under limited pressure in premarket trading.

Berkshire Hathaway Buys Shares Of Barrick Gold

While gold and silver continue their rebound after the recent sell-off, gold and silver miners are set for a strong start of the week as Warren Buffet’s Berkshire Hathaway disclosed that it bought 20.9 million shares of Barrick Gold.

Miners’ shares have been under pressure during the recent sell-off but are set for increased trading activity after Berkshire’s move.

Berkshire’s position in a leading gold miner will increase investors’ confidence in the sector and attract new money into gold and silver miners.

For a look at all of today’s economic events, check out our economic calendar.

Middle-Week Screening. Seesaw on the Market. Silver and Alibaba are for long; Boeing is for short

Overview and trends

Across the pond, according to Reuters, European Union leaders did not reach solidarity on a coronavirus stimulus plan on Sunday, German Chancellor Angela Merkel said as marathon negotiations ran into a third day and acrimony mounted over the demands of rich but thrifty countries.

On Monday U.S. officials including Senate Majority Leader Mitch McConnell and Treasury Secretary Steven Mnuchin met in the White House to discuss another coronavirus stimulus package. Mnuchin reiterated he wanted to put a cap on spending to about 1 trillion dollars, well below House Speaker Nancy Pelosi’s $3.5 trillion relief plan. He also said the bill will focus on “kids and jobs and vaccines.” Meantime U.S. stocks were higher Monday as Wall Street came off its third straight week of gains and investors turned were busy analyzing more earnings reports including those from Halliburton and IBM (the latter beat estimates by a wide margin and added over 3% in post-market).

Yesterday stocks closed mostly higher on Wall Street Tuesday despite a final hour hiccup that nearly wiped out the market’s gains for the day. The S&P 500 added less than prominent 0.2%, after culminating as much as plus 0.8%. Banks, telecoms and energy stocks led the gains, offsetting mounting losses in technology stocks – something every smart investor must take seriously in the wake of more big techs’ like Apple, Amazon and Microsoft earnings underway – which pulled the Nasdaq index lower.

Oil prices joined precious metals’ extravaganza and rose, reaching the highest levels since March. West Texas Intermediate crude gained more than 3%, to 41 dollar 88 cents per barrel. Brent crude, in its turn, rose almost 3%, to 44 dollars 30 cents per barrel, at the U.S. market close.

Most investors wait as a savior for more financial stimuli from big governments and central banks to prop up stocks and bonds that are slowly losing steam.

Seemingly in response to that urge, many governments have already announced large amounts of additional fiscal support to keep tackling the pandemic. But S&P Global Ratings suggests that some countries, including the U.S., have shown “a degree of fiscal fatigue”. The problem is that additional spending will worsen the governments’ balance sheets, but they are still necessary to “prevent things from getting even worse.”

S&P Global Ratings earlier this month downgraded its forecast for the global economy. The agency now expects global GDP to shrink by 3.8% this year — worse than the 2.4% contraction it previously projected. So the central banks and governments really have little choice but to move on.

The end of the coronavirus pandemic could bring a large number of new asset managers. Recently published data from a research firm called eVestment showed that the number of new investment firm launches substituting some less lucky rivals tends to spike following economic crises.

Here’s why, according to data firm: As markets contract, asset management employees may be laid off. Instead of seeking out a new job, they start their own firms. Additionally, some of these employees leave their jobs voluntarily, with the goal of taking a new investment approach presented by market turmoil.

Conclusion: in order to survive hard times, one needs to be open to new trends and must possess the skill of distinguishing between winning and losing assets.

Trading ideas

Silver futures logged the highest finish in nearly 4 years at the beginning of the week, buoyed by expectations for further central bank stimulation that destroy the value of world major currencies and as the rise in global COVID-19 cases continues to threaten the economic recovery. September silver added almost a dollar, or 4.9% since July 17, to settle at $20.21 an ounce, the highest front-month contract finish since August 2016. Silver is known to be more choppy and volatile precious metal as compared to gold. But this year its uncharacteristic trade smoothness since mid-March leaves its older sister gold’s parameters derailed.

Alibaba’s affiliate company Ant Group, operating the mobile payment service Alipay, reportedly started the process of its initial public offering on the Hong Kong Stock Exchange and Shanghai’s Nasdaq-style STAR market simultaneously. In China Alipay is much more prominent than the namesake portal (alibaba.com) of Alibaba Group. Ant was previously valued at $150 billion after its last funding round in 2018, making it the world’s most valuable start-up.

Reportedly, Ant generated about 120 billion yuan or $17.1 billion dollars in revenue and nearly 17 billion yuan or $2.4 billion dollars in net profit last year. This is very good news for Alibaba stock which rose over 50% since April. Its earnings reporting day is scheduled for August 13, so there is plenty of time to judge this event keeping the stock in the portfolio.

Boeing’s reputation remains under siege even after the much-advertised test flight of Boeing 737 MAX couple of weeks ago. The company was forced to release a catastrophically damning set of documents to congressional investigators last week that included “conversations among Boeing pilots and other employees about software issues and other problems with flight simulators” for the 737 Max, the plane involved in two fatal crashes. The messages further complicate Boeing’s tense relationship with the Federal Aviation Administration, which can’t be satisfied to read the disdain with which Boeing treated the civil aviation regulators.

After the undisclosed outcome test flight, the Boeing share edged up almost 6.5% to $176, but its quarterly earnings date of July 29 will be Boeing’s judgement day, because there is nothing to cheer up its shareholders with. The company reported net loss of $5.72 a share in the previous quarter, which is expected to further deepen this time around, so Boeing is a definite short, which will be easy to cover at a profit thereafter.

For a look at all of today’s economic events, check out our economic calendar.

By Vladimir Rojankovski, Grand Capital Chief Analyst

Vaccine Hopes, EU Deal Drive Asia Pacific Shares Higher; Alibaba’s Ant Group Announces Dual-Listing

The major Asia Pacific stock indexes rebounded on Tuesday following Monday’s mixed performance with some hitting five-month highs after European Union leaders agreed on a massive stimulus plan for their coronavirus-blighted economies.

The indexes opened higher following Wall Street’s lead on hopes that vaccines against the COVID-19 disease might be ready by the end of the year, following promising early data from trials of three potential vaccines.

On Tuesday, Japan’s Nikkei 225 Index settled at 22884.22, up 166.74 or +0.73%. Hong Kong’s Hang Seng Index is trading 25527.10, up 469.11 or 1.87% and South Korea’s KOSPI Index closed at 2228.83, up 30.63 or +1.39%.

China’s Shanghai Index is trading 3321.38, up 7.23 or +0.22% and Australia’s S&P/ASX 200 closed at 6156.30, up 154.70 or +2.58%.

Asian Shares Boosted by EU Recovery Fund Deal

European Union (EU) leaders reached a deal on a 750 billion Euro ($857 billion) recovery fund to help the region recover from the coronavirus crisis.

European Council President Charles Michel said he believes this deal will be seen as a “pivotal moment” for Europe. “We did it! Europe is strong. Europe is united,” he said in an early Tuesday press conference announcing the agreement. “These were, of course, difficult negotiations in very difficult times for all Europeans.”

Positive Coronavirus Vaccine News Buoys Market Sentiment

Asia Pacific markets were supported early in the session on Tuesday after investor sentiment was supported by a slew of positive news on the coronavirus vaccine front.

Pfizer and BioNTech reported early positive data on a joint coronavirus vaccine Monday and another candidate from Oxford University and AstraZeneca also showed a positive immune response in an early trial.

Alibaba’s Ant Could Be Bigger than Some Wall Street Banks

Ant Group, an affiliate of Alibaba, announced plans for its long-awaited dual listing in Shanghai and Hong Kong on Monday. E-commerce giant Alibaba Group Holding’s Hong Kong shares jumped 6.59% on the news.

Ant Group runs Alipay, one of China’s most popular mobile payment apps, but has also been expanding into products such as wealth management and loans.

Ant Group has not priced its shares yet but one analyst said the company could be valued at over $200 billion.

For a look at all of today’s economic events, check out our economic calendar.

How to Trade FANG Stock with CFD’s

The FANG stocks are some of the biggest consumer and tech stocks listed on the US market. They are favorites amongst active traders because their high growth rates have led to massive returns and strong trends.

CNBC host Jim Cramer originally coined the term ‘FANG Stocks’ in 2013, and it referred to Facebook, Amazon, Netflix, and Google. Most traders now include Apple and use the acronym FAANG.

Some have even included Alibaba and Nvidia, extending the acronym to FAAANNG. However, for this discussion, we will stick to the five, FAANG stocks: Facebook, Apple, Amazon, Netflix, and Google.

The easiest way to profit whenever a FAANG price goes up or down is to trade Contract for Difference (CFD) on these stocks. 

An overview of the FAANG Stocks

Facebook is worth $450 billion, making it the fourth largest company in the world by market cap. Since listing in 2012, the company has grown EPS from $0.16 to $6.80 in 2017. It’s done this by building a user base of over 2 billion monthly users and growing the profitability of its advertising business. Facebook’s stock price has risen more than 500 percent since 2012.

Amazon is the most successful web retailer in the world and the second most valuable company in the world. Since 2010, it has grown annual earnings from $2.28 a share to $6.35, which is the reason the company is now worth $863 billion. Traders and investors both love Amazon and believe in the vision of its founder Jeff Bezos. $1,000 invested in Amazon in 1997 would be worth over $1 million today.

We all know how innovative Apple, the company that brought us the iPod, the iPhone and the iPad, is. Steve Job’s vision and the company’s long history of bringing out new products has made it the most valuable and profitable company in the world. Between 2005 and 2015, Apple grew net income from $1.13 billion to $53 billion, a 5000% increase. Its earnings per share have grown from $1.68 in 2010 to $10.36 in 2017.

Netflix is one of the fastest growing companies in history. If you had invested $1,000 in Netflix in 2002 when it listed, your investment would be worth over $400,000. However, along the way, Netflix has had some large pullbacks, allowing traders to short the stock, and then buy it back at a lower price.

Anyone who uses the internet knows how prolific Google is. It’s all over the web and makes over a hundred billion USD a year from its advertising business. Although it is no maturing as a company it still managed to grow earnings per share from $10 in 2010 to $34.2 in 2017. Google’s share price has doubled since 2015, giving the company a value of $800 billion.

Using CFDs to Trade FAANG Stocks

FAANG stocks are favorites amongst traders because they have strong underlying growth, lots of liquidity and they are in the news a lot. There are opportunities to trade over every time period from minutes to months, and opportunities to go long and short.

CFDs (contracts for difference) are one of the best instruments to use to trade these types of stocks. They offer the opportunity to use leverage and to take short positions not only on currencies and commodities such as EUR/USD, GBP/USD, gold and crude oil but also on stocks. When you trade CFDs you do not actually own the underlying asset, but you have exposure to the price move, whether its up or down.

Recommended trading strategies

There are several very different trading strategies that investors can use to trade FAANG stocks. Because these stocks are in the news a lot, traders often trade around announcements and other news flow.

Stocks offer the best trading opportunities when volatility increases, and this happens when more traders are watching them. For Apple, this happens when a new product is launched and when earnings are announced. For Amazon, Prime Day and the Christmas shopping season are important. For Facebook and Netflix, any announcement about subscriber and user numbers are important.

Traders need to work out what the market is expecting and whether the company is living up to those expectations. Traders will often buy a stock as the hype increases, and then sell when the news is released – unless it’s much better than expected. If they believe the amount of hype is unrealistic, they may even go short just before the announcement, in anticipation of disappointing news.

If you trade on short-term charts, you can take long and short positions, in the direction of the medium-term trend on a 4-hour, 60-minute or 15-minute chart. Moving average cross-over strategies work well for FAANG stocks on these charts, especially when the hype rate is increasing.

Conclusion

The FAANG stocks are favorites amongst active traders because they are well-known companies that people understand, and because a lot of people follow them, there is lots of volatility and liquidity. The fact that they also have high growth rates means they also have big price moves. These factors all contribute to their popularity amongst traders.