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How Alibaba Stock Gained 14.4% Last Month

By Anders Bylund - Sep 8, 2020 at 4:10PM

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The Chinese e-commerce titan overcame political tensions with the help of a strong earnings report.

What happened

Shares of Alibaba (BABA -5.00%) rose 14.4% in August 2020, according to data from S&P Global Market Intelligence. The Chinese e-commerce giant was off to a rough start due to American government actions against Chinese companies, but that damage was forgotten when Alibaba posted great first-quarter results on August 20.

So what

Alibaba's stock fell more than 5% on August 7 as the Trump administration declared bans of two popular social media platforms of Chinese origin. Alibaba could lose significant sales destined for American shores if the relationship between Beijing and Washington grows any colder.

All was forgiven when Alibaba exceeded Wall Street's first-quarter targets across the board. Sales rose 30% year over year to $21.8 billion, and earnings increased from $1.83 to $2.10 per share. Your average analyst would have settled for earnings of roughly $1.98 per share on sales near $21.3 billion.

A purple charting arrow bounces skyward off a black trampoline.

Image source: Getty Images.

Now what

The strong earnings report was followed by a plethora of bullish analyst reports, raising price targets and reiterating "buy" ratings. The Street was generally impressed by solid growth in Chinese e-commerce sales and by potential high-octane growth in the Alicloud cloud-computing platform and Ant Financial online banking service. On that note, Alibaba is preparing to launch a stock offering for Ant Financial on the Hong Kong and Shanghai exchanges. The public offering could break records, aiming for a launch-day valuation of at least $200 billion.

Anders Bylund owns shares of Alibaba Group Holding Ltd. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd. The Motley Fool has a disclosure policy.

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