Alibaba Earnings: What to Watch - Wall Street Journal (blog)
- Alibaba is slated to report its quarterly earnings Thursday.
- Reuters
Chinese e-commerce giant Alibaba Group Holding Ltd. will report its earnings for the fiscal third quarter ended Dec. 31 before the U.S. market opens on Thursday. Here’s what to watch for:
EARNINGS FORECAST:Alibaba is expected to report a net profit of 10.1 billion yuan (US$1.5 billion), up 69% from 5.98 billion yuan ($964 million) a year earlier, according to a poll of 16 analysts by S&P Capital IQ. Net profit in the same quarter in 2014 had fallen 28% from the previous year due to expenses from giving shares to employees. Analysts are attributing the rise in earnings this time to improvements in Alibaba’s ability to increase the amount it earns from each transaction hosted on its marketplaces.
REVENUE FORECAST: Analysts surveyed by S&P Capital IQ forecast revenue of 33.8 billion yuan, up 29% from 26.2 billion yuan ($4.2 billion) in the same period in 2014. That would be a slower growth rate than what the company had reported in the same period a year earlier. Analysts say a moderation in growth is normal for a business that is already dominating China’s e-commerce sector with around 80% of the market.
What to watch:
CHINA SLOWDOWN AND CONSUMPTION TRENDS: Concerns about China’s economic slowdown and its impact on Alibaba have prompted a broad sell-off of the company’s shares in recent months. Shares have fallen about 30% over the past year. Nomura Securities analysts said in a research note that they believe the sell-off was unjustified. “Investors might have thought of Alibaba as one of the biggest victims of China slow down given its business scale. But we believe the impact of solid Chinese consumption should far outweigh the impact of a slowing economy on Alibaba and other Chinese e-commerce companies.” During Singles’ Day, China’s online shopping festival in November, Alibaba reported a blockbuster $14.3 billion in sales, 54% higher than the previous year’s festival and better than many analysts had expected.
MEDIA STRATEGY: In November, Alibaba reached a deal to buy Chinese online video provider Youku Tudou Inc. to give it a share of the country’s rapidly growing online video market. The deal values Youku Tudou, in which Alibaba already owns about a one-fifth stake, at about $4.4 billion. Investors will be keen to hear about Alibaba’s plans for the online video provider amid intensifying competition from Internet rivals Tencent Holdings Ltd. and Baidu Inc. Credit Suisse analysts wrote in a recent research note that the Youku Tudou deal would enable Alibaba to offer a wider range of e-commerce services ranging from brand advertising to facilitating transactions. Alibaba’s management may also be asked about political complications that may arise from buying Hong Kong’s South China Morning Post newspaper. Jack Ma, the company’s executive chairman, has said Alibaba would defend the paper’s independence.
OFFLINE SERVICES: Investors will be interested in Alibaba’s plans for its stake in China’s leading online provider of movie ticketing, restaurant bookings and other on-demand services, Meituan.com, which merged with Dianping. The Wall Street Journal reported in November, citing people familiar with the situation, that Alibaba is looking to sell its stake in Meituan.com as it builds a competing platform of its own. There will also be interest in hearing Alibaba’s broader take on the competitive environment and how it plans to distinguish its services from those of its rivals.
______________________________________________________
For the latest news and analysis, follow @wsjd.
And like us on Facebook to get our news right in your feed:
Get breaking news and personal-tech reviews delivered right to your inbox.
More from WSJ.D: And make sure to visit WSJ.D for all of our news, personal tech coverage, analysis and more, and add our XML feed to your favorite reader.
