What happened

Shares of Alibaba (BABA -1.88%) surged last month as the company rode a broader wave in Chinese stocks on signs that China's economy was recovering as the U.S. fell victim to a resurgence in coronavirus cases. A call from China's state-owned media also helped push Chinese stocks higher. According to data from S&P Global Market Intelligence, Alibaba, China's biggest e-commerce platform, finished July up 16%. 

As the chart below shows, the gains came entirely at the beginning of the month.

BABA Chart

BABA data by YCharts.

So what

The Chinese stock market jumped after a July 6 front-page editorial in a state-owned newspaper said that "a healthy bull market" was crucial for the country's recovery from the coronavirus, which seemed to drive retail investors to buy Chinese stocks. The news lifted the Shanghai Composite by 5.7%, and Alibaba by 7.3%. The tech giant followed that up with another 7% gain on July 8.

A rock with the Alibaba logo at company headquarters

Alibaba's headquarters. Image source: Alibaba.

Though there was no specific news out on the company, Alibaba is well positioned to thrive during the pandemic as the company operates China's largest e-commerce marketplace as well as a fast-growing cloud-computing business. Still, while U.S. e-commerce stocks have boomed this year, investors have largely overlooked Alibaba, which generates billions in profits and trades at a very reasonable P/E ratio of just 30 based on this year's expected earnings.

Later in the month, plans emerged for the company to take Ant Financial public. That Alibaba fintech subsidary, which owns Alipay, could reap $30 billion in an IPO in Asia and hit a $200 billion valuation.

Now what

Alibaba will report quarterly earnings later this month. Analysts are expecting a strong recovery as Chinese economic data has shown the economy bouncing back from lockdowns in the first quarter, and earnings reports from U.S. companies like Apple and Tesla have topped expectations thanks to robust Chinese consumer demand, a bullish signal for Alibaba's quarter.

Analysts expect Alibaba's revenue to jump 45.8% in the quarter to $21.1 billion, and for earnings per share to increase from $1.77 to $1.97. Considering the broader momentum in e-commerce shares, a strong report could spark another surge in the stock.