What to Look For in Alibaba Earnings

January 27, 2016 by Chris Lange

Alibaba Group Holding Ltd. (NYSE: BABA) is scheduled to report its fiscal third-quarter financial results before the markets open on Thursday. The consensus estimates from Thomson Reuters call for $5.81 in earnings per share (EPS) on $33.26 billion in revenue. The fiscal third quarter from last year had $5.03 in EPS on $26.18 billion in revenue.

Alibaba is the largest online and mobile commerce company as measured by gross merchandise volume, and it had the highest profile initial public offering (IPO) of 2014. The stock has acted horrible since, printing highs at $120 in mid-November of 2014.

Plain and simple, the dominance in Alibaba’s core business, the very hard barrier to entry for competition and new growth opportunities like cross-border e-commerce make the stock extremely attractive. With most of the damage to the China equity markets seemingly subsided for now, the residual effect to the company may subside too.

The company recently made a non-binding offer to acquire the 82% of Youku Tudou that it doesn’t already own. This comes as little surprise to Wall Street, given Jack Ma’s vision for digital content and delivery. While a few of the leading video sites continue to struggle, there is a ton of synergies overall in the combination.

A few analysts weighed in on this Chinese e-commerce giant prior to its earnings report:

  • Wedbush reiterated a Neutral rating with an $80 price target.
  • Macquarie reiterated a Neutral rating with an $80 price target.
  • SunTrust reiterated a Buy rating with a $100 price target.
  • Morgan Stanley has an Overweight rating with a $115 price target.

So far in 2016, Alibaba has underperformed the market, with the stock down 14% year to date. Over the past 52 weeks, the stock is down even further at about 33%.

Shares of Alibaba were trading at $71.00 on Wednesday, with a consensus analyst price target of $95.52 and a 52-week trading range of $57.20 to $101.49.

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