6/25/2021 What Is The Likelihood Of A Rise In Alibaba’s Stock?

Jun 4, 2021, 06:30am EDT | 4,518 views

What Is The Likelihood Of A Rise

In Alibaba’s Stock?
Trefis Team Contributor
Great Speculations Contributor Group
Markets

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Alibaba’s stock (NYSE: BABA) has

risen by 4% over the last five trading
days. In comparison the broader
S&P500 rose by 0.6% over the last five
trading days. Alibaba’s stock witnessed
a rise in the last couple of weeks after BEIJING, CHINA - 2021/04/10:

the release of FY 2021 results (ended Pedestrians walk past the Alibaba
headquarters building in Beijing. The ...
March 2021) on May 13, 2021. The [+] SOPA IMAGES/LIGHTROCKET VIA GETTY

company recorded revenue of RMB 717 IMAGES

billion ($109.5 billion), up 41% y-o-y. In

Q4 the company was hit with an anti-monopoly fine in China of RMB 18
billion ($2.8 billion) despite which for the full year earnings grew by 30%
y-o-y to RMB 172 billion ($26.3 billion). Will the company continue its
upward trajectory over the coming weeks, or is a fall in the stock
imminent? According to the Trefis Machine Learning Engine, which
identifies trends in a company’s stock price using multiple years of
historical stock data, returns for BABA’s stock average around 1.7% in the
next one-month (twenty-one trading days) period after experiencing a 4%
rise in a week (five trading days). Further, the stock is likely to outperform
S&P500 returns by 0.6% over the next month (twenty-one trading days).

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6/25/2021 What Is The Likelihood Of A Rise In Alibaba’s Stock?

But how would these numbers change if you are interested in holding
Alibaba’s stock for a shorter or a longer time period? You can test the
answer and many other combinations on the Trefis Machine Learning
Engine to test Alibaba’s stock chances of a rise after a fall. You
can test the chance of recovery over different time intervals of a quarter,
month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF BABA stock moved by -5% over five trading days, THEN over the next
twenty-one trading days, BABA stock moves an average of 2.6%, which
implies an excess return of 0.6% compared to the S&P500.

Average Return TREFIS

More importantly, there is a 57.6% probability of a positive return over

the next twenty-one trading days and a 51.6% probability of a positive
excess return after a -5% change over five trading days.

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Stock Movements

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6/25/2021 What Is The Likelihood Of A Rise In Alibaba’s Stock?

Question 1: Is the average return for Alibaba Group stock

higher after a drop?

Answer:

Case 1: Alibaba Group stock drops by -5% or more in a week

Case 2: Alibaba Group stock rises by 5% or more in a week

Is the average return for Alibaba Group stock higher over the subsequent
month after Case 1 or Case 2?

BABA stock fares better after Case 1, with an average return of 2.7% over
the next month (21 trading days) under Case 1 (where the stock has just
suffered a 5% loss over the previous week), versus, an average return of
2.3% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next
21 trading days under Case 1, and an average return of just 0.5% for Case
2 as detailed in our dashboard that details the average return for the
S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how
Alibaba Group stock is likely to behave after any specific gain or loss over
a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Alibaba Group stock, the expectation is over time the
near term fluctuations will cancel out, and the long-term positive trend
will favor you - at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s

calculations, patience absolutely pays for most stocks!

For BABA stock, the returns over the next N days after a -5% change over
the last 5 trading days is detailed in the table below, along with the
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returns for the S&P500:

Average Return TREFIS

You can try the engine to see what this table looks like for Alibaba Group
after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you

wait for a while?

Answer:

The average return after a rise is understandably lower than after a fall as
detailed in the previous question. Interestingly, though, if a stock has
gained over the last few days, you would do better to avoid short-term
bets for most stocks.

BABA’s returns over the next N days after a 5% change over the last 5
trading days is detailed in the table below, along with the returns for the
S&P500:

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Average Return TREFIS

It’s pretty powerful to test the trend for yourself for Alibaba Group stock
by changing the inputs in the charts above.

While Alibaba stock may have moved, it is helpful to see how its peers
stack up. Check out Amazon Peer Comparisons to see how Amazon
compares against peers on metrics that matter. You can find more such
useful comparisons on Peer Comparisons.

See all Trefis Featured Analyses and Download Trefis Data here

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Led by MIT engineers and Wall Street analysts, Trefis (through its dashboards
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