Alibaba Stock Breaks Lower Ahead of Earnings Report

Sentiment surrounding BABA is overwhelmingly optimsitc

Deputy Editor
Nov 17, 2021 at 1:52 PM
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It's been a rocky trip downward for China-based tech giant Alibaba Group Holding Ltd (NYSE:BABA), which was last seen off 3.8% at $162.03, just ahead of its fiscal second-quarter earnings report, due out before the open tomorrow, Nov. 18. Alibaba has taken several hits over the past year, as the Chinese government tightens restrictions for corporations and cracks down on antitrust practices

In fact, the stock has lost 30.6% in 2021, and just hit a two-year low of $138.43 on Oct. 4. The shares gapped higher shortly after this bottom, and look to have found support at the $160 level, while the 400-day moving average has also emerged as a floor. 

baba nov 17

Alibaba stock has a pretty depressing post-earnings past, falling lower after every single one of its reports over the past two years, including a 6.3% drop last May. The security has averaged a 2.9% next-day swing during these past eight sessions, which is lower than the 7.4% move options traders are pricing in for tomorrow, regardless of direction. 

Despite the stocks collapse over the past year, options traders are still incredibly bullish. At the  International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BABA sports a 10-day call/put volume ratio of 3.27, which stands higher than 87% of readings from the past year. In other words, long calls are being picked up at a quicker clip than what's typically seen.

Short sellers have been hitting the exits in droves. Short interest dropped 33.9% in the last two reporting periods, and now makes up just a slim 2.6% of the stock's available float, or a little under two days at BABA's average daily pace of trading. 

Analaysts have also been exceedingly optimistic. Of the 14 in coverage, 13 say "buy" or better. Plus. the 12-month consensus price target of $243.13 is a 50.7% premium to current levels. 

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