Alibaba (BABA) is already one of the largest companies in China, as well as the world. After a massive IPO in 2014, and despite its share price struggling in 2015, the company’s third quarter earnings have brought back strong optimism from shareholders and potential investors. Despite a still struggling Chinese economy, the online retail giant beat analyst forecasts, and seems poised to continue rising. Efforts to expand their portfolio and their international reach have given the company substantial tailwinds for growth. Increasing penetration in the Chinese market has also helped ensure the company will remain on a solid growth trend for years to come. Finally, a series of joint ventures and acquisitions have positioned Alibaba to further expand their user base and continue delivering value to shareholders.

Great Third Quarter

Alibaba’s recently reported third quarter earnings were a breath of fresh air to investors who had seen the company’s shares take a beating over the past year, with prices losing almost 40% of their value over the summer, before regaining it recently. The earnings report, released last week, shows a company that has been aggressively expanding and is increasingly dominating the online retail market in China.

The company’s revenue for the third quarter rose by 32% year over year to RMB 22.17 billion, mostly on the back of an increasingly profitable and reliable Chinese mobile segment that grew revenues by 183% from RMB 3.7 to RMB 10.52 billion. This growth in mobile revenues has been a fantastic boon for Alibaba, as they have been able to increase their mobile monetization rate to 2.39% (a 10% increase). That number should only increase in the next few years, as Alibaba continues to expand their reach in the mobile sector.

Another strong area for the company was their impressive Gross Merchandise Volume (GMV) for the quarter. Overall, Alibaba reported RMB 438 billion in GMV. This represents a 15% year over year improvement in the total number, and a 28% increase over the previous quarter. This is made all the more impressive when considering that for the quarter, mobile GMV represented 62% of the total amount. This is in keeping with a positive trend in the past eight quarters of growing the company’s mobile footprint in China.

Set for Future Success

Alibaba is not content to rest on their laurels, and has been aggressive in improving and expanding its business away from heavy reliance on their (still successful) e-commerce branch. These moves have helped position Alibaba not only for success, but also for continued growth in the Chinese market, which they already control.

The company has reported fantastic numbers in user growth (both annually and monthly), as well as buyer growth. The company reported 386 million annual active buyers (users who confirm at least one purchase in a year on any of Alibaba’s platforms), as well as 346 million monthly active users on their mobile platforms. Overall, Alibaba controls approximately 80% of the Chinese e-commerce market.

Even with this dominance, Alibaba has not grown comfortable with its position in its continued efforts to expand the reach and improve their brand. The company recently agreed to buy Chinese video-streaming site Youku Tudou—known as the Chinese youtube—for $3.6 billion. Alibaba claims the move will add significant value in terms of monetization potential, as well as give their platforms an even bigger push thanks to access to Youku’s over 500 million monthly users.

The company has also invested heavily in their cloud computing solution, Aliyun. The company is betting heavily on this sector for growth, and so far have been highly successful at it. For the third quarter, Aliyun brought in $102 million worth of revenue, an otherworldly 128% year over year improvement. This is still seen as a more long-term investment, with Alibaba not worrying about profitability, but still investing heavily in expanding their infrastructure.

Finally, Alibaba has been focusing on expanding their geographic footprint both in and out of China. They have recently initiated projects to improve network infrastructure in smaller villages around China in order to expand their audience reach, already connecting to more than 4000 additional villages. They have also initiated a partnership with several Dutch brands, beginning to offer retail products on Alibaba’s marketplaces as well as partnering with Royal Dutch Airlines KLM (KLMR) to create an online store for Chinese users through Alibaba’s Alitrip platform.

The Technical Take

Share prices have rebounded substantially from September lows and only recently encountered strong resistance at $84.90 before beginning to pullback modestly from the highest levels since July. The weakness in Chinese equity markets combined with revelations about the Alibaba business were enough to severely dent optimism, but as revenue and profit growth show, Alibaba is poised to be a strong long-term player in the ecommerce space. At present, share prices have been trending higher in an emerging equidistant channel pattern with a strongly bullish bias. Tailwinds from trending above both the 50-day and 200-day moving averages are adding to potential upside momentum in a sign that share prices could go much higher after a technical retreat.

The key level to watch in the near-term is $75.95 which stands as critical medium-term support. With both the Stochastic Oscillator and the Relative Strength Index indicating the shares are slightly overbought and in potential territory for a correction lower, should prices manage to find support at $75.95, it could signal the emergence of a head and shoulders bullish formation as the right shoulder develops. After a substantial appreciation following better than anticipated earnings, a quick technical pullback could very well be in order despite the longer-term bias to the upside in share prices targeting $95 over the medium to longer-term time frames. Value investors would be keen to pick up shares on any pronounced pullback in prices.

Conclusion

Despite recent concerns about Alibaba’s sustainability and long-term growth potential, and even with fears that their initial IPO valuation had been too high, the company has been able to navigate a difficult start to the year to finally settle into a great position entering the final stretch of the year. If Alibaba can replicate their third quarter success during the fourth quarter, it could be a strong indication that the company is heading in the right direction. This is a great opportunity for investors seeking a longer-term position, as the company is betting heavily on its long-term prospects for profitability, and at this price is a relative steal with shares beginning to march back upwards.