What to Expect From Alibaba Earnings

November 1, 2016 by Chris Lange

Alibaba Group Holding Limited (NYSE: BABA) is scheduled to report fiscal second quarter financial results before markets open on Wednesday. Around this time two years ago, this company was the hottest thing on the planet and getting ready to come public. Since that time Alibaba has faced some tough times but 2016 appears to be Alibaba’s year with earnings just around the corner.

The consensus estimates from Thomson Reuters are calling for $0.69 in earnings per share (EPS) and $5.03 billion in revenue. The same period from last year had $3.63 in EPS and $22.17 billion in revenue.

Goldman Sachs analyst Piyush Mubayi already had a Buy rating on Alibaba, but now it is named as the top Chinese internet stock pick. The firm raised its price target to $130 from $120, calling Alibaba a compelling valuation versus strong growth fundamentals. If Goldman Sachs is proven right, then Alibaba has almost 25% upside from the most recent closing price of $101.69.

As for the reasons, several issues were cited in the call. Top-line growth was being driven by e-commerce, cloud and media. The cloud is expected to be profitable in the next two years. Ant Financial, Cainiao and Alipay were all named in the e-commerce and payments arena.

Prior to the release of the earnings report, a few other analysts weighed in on Alibaba:

  • Citigroup has a Buy rating with a $133 price target.
  • Needham has a Buy rating and a $125 price target.
  • Nomura has a Buy rating and a $129 price target.
  • SunTrust Banks has a Buy rating and a $125 price target.
  • Deutsche Bank has a Buy rating and a $138 price target.
  • Morgan Stanley reiterated an Overweight rating with a $132 price target.
  • MKM reiterated a Buy rating and a $130 price target.

So far in 2016, Alibaba has outperformed the broad markets with the stock up about 23% in that time. Over the past 52 weeks, the stock is only up 18.6%.

Shares of Alibaba were last trading down about 1.6% at $100.04, with a consensus analyst price target of $116.33 and a 52-week trading range of $59.25 to $109.87.

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