17 Sep News & Trend Lab insights: Alibaba – Daniel Zheng takes over and journalists do not quite like it
An analysis and forecast based on current sentiments in the YUKKA Lab News Lab.
CEO Jack Ma has resigned, trade war fears between China and America are regaining attention and competitor Amazon has reached a $1 Trillion valuation. Being called a more promising company than Amazon, Alibaba has to regain its foothold with many changes going on within the company itself and its market environment.
In this analysis and forecast, we are going to take a closer look at how the general market sentiment of Alibaba is doing and what the overall market sentiment expects from the new CEO Daniel Zhang. We will also try to make a prediction not only on the sentiment of the Alibaba Group but also on the market environment and its sector. All the sentiment data and graphs in this article were derived from the YUKKA Lab News Lab.
A few days before the official retirement of Jack Ma on September 8th, the otherwise rather steady sentiment of Alibaba began to dip (Figure 1). On September 10th the sentiment hit a new monthly low of just 42%, which is about 10% lower than the sentiment during the rest of the month. As of today, the sentiment was not able to recover in anyways, showing that general trust in Daniel Zheng is yet to be built and that uncertainty about what he will or will not change in the future dominate the thoughts of analysts and journalists. This fact gains even more in importance as the previously mentioned trade war fears between the United States and China currently leave rather little security in forecasting what is going to happen to the expansion of Chinese companies in the States.
The outlook for Alibaba improves though when we take a look at the broader market environment in which the company operates in. The sentiment of the sector “General Retailers” of which Alibaba is a part of is doing well with a slow but steady increase of about 3% over the past month (Figure 2). This can be traced back to the rise of consumer spendings in the past half year which is mostly due to a well-doing economy. As there are currently no signs of a more significant drop in sentiment, we can, quite certainly, say that Alibaba is and also will continue to ride this wave of big revenues. This is also due to Alibaba being at the forefront of the retail business as it builds its sales from e-commerce compared to other traditional companies who still own physical stores.
Figure 2: 30-day sentiment of the General Retailers Sector
China as an economy is continuing to do well in terms of sentiment development. Similar to the previously mentioned General Retailers sector, China also experienced a steady sentiment growth of about 4% over the past month (Figure 3). Though this rather feels like a contradiction to what we read in the newspaper day in day out nowadays, as speculations on trade fears dominate the headlines. When we take a look at the YUKKA Lab News Lab cockpit, it becomes evident that despite this rather negative news, China as a whole still has a lot of overlooked growth potential outside the United States. This only can be visualized with the YUKKA Lab solution which takes in hundreds of thousands of articles a day and therefore takes all news and sentiments into consideration.
Figure 3: 30-day Sentiment of China
Overall it becomes clear that in terms of market success and closing the gap to Alibaba’s biggest rival Amazon comes from internal decisions rather than external ones. From what we can say based on current market sentiments is that other than the insecurity of trade war fears, Daniel Zheng and Alibaba certainly have the right business environment to do well regarding sales and growth. The main reason for the recent drop in the share price was the announcement of the retirement of Jack Ma, similar to the sentiment; the share price has not recovered yet either.
This leads to my conclusion of predicting that once the change has settled in at Alibaba, the stock has the potential to skyrocket soon. Conditions at the moment are right for Alibaba to prove once more that they are a big player in the market, despite the current dominance of Amazon.
As often it is difficult to say how long it will take Daniel Zheng to prove to analysts that he was the right one to follow in Jack Ma’s footsteps, especially after just one week after the change in leadership. In this case, it is even more important to hold sentiment developments and news in close line of sight to observe and react to changes. The YUKKA Lab News Lab in this and many other cases provides the perfect solution for keeping track of sentiment changes of companies, countries and much more. Feel free to make up your mind during our free 30-day trial period!
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This story was provided by Valentin Back, Research Assistant for Finance & Analytics at YUKKA Lab and Student at Warwick Business School.