Alibaba stock recovery hits roadblocks ahead of earnings report

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(Bloomberg) — Alibaba Group Holding Ltd. faces a reality check when the e-commerce giant reports quarterly results on Thursday.

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Investors will be very focused on forward guidance, especially after the severe Covid lockdowns in China curbed growth in the second quarter. Concerns about a slowing economy, an ongoing regulatory crackdown and heightened Sino-US tensions also complicate those prospects.

Shares of the tech company nearly wiped out their recovery from March lows, falling 20% ​​this year in Hong Kong, in line with a collapse in the Hang Seng Tech Index. The stock rose a whopping 5.8% on Thursday.

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Here are three charts showing the roadblocks for Alibaba’s stock:

Analysts expect Alibaba’s April-June sales to fall 0.9% from a year earlier, which is the first quarter sales contracting. Some analysts also focus on cost-cutting measures and investment plans in the company’s results.

Daiwa Capital Markets sees a larger drop in revenue as core trading “could take a hit in April-May due to supply chain disruptions,” analysts including John Choi wrote in a note last month.

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Alibaba’s drop of more than 21% from a July high has brought the stock near technical oversold territory. Shares have fallen below both the 50-day and 100-day moving averages, which have provided some support. A new regulatory fine on past deals, a reported data breach investigation and a soft macro economy have sent the stock tumbling. The news that co-founder Jack Ma was planning to relinquish control of Ant Group also caused uncertainty.

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Investors are trying to gauge how much Alibaba’s companies can recover in the coming quarters after China began easing quarantine rules and pledged to support the economy. Geopolitical tensions and concerns about the global recession have brought a recent rise in analyst earnings forecasts to a halt, pushing the company’s 12-month earnings forecast back to 2019 levels.

(Updates with Thursday’s trading prices)

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