Alibaba earnings are coming. Here’s when, what to expect and 4 numbers to watch.
A sell-off in the tech sector and macroeconomic headwinds in China mean that Alibaba’s impending earnings report will certainly be interesting.
The Chinese e-commerce giant announced Friday that its financial results for the last three months of 2021 will be published on Thursday, February 24. The wait was long.
The Nasdaq was forecasting earnings next week, Feb. 15, but its estimate, based on algorithmic analysis of historical data, predicted a report last Tuesday, as well as the one before.
(ticker: BABA) the stock rose 1% in the US pre-market, beating the 0.2% drop expected for the tech-heavy market
index. Stocks are still trading at their lowest level since the spring of 2017, and the upcoming quarterly numbers could be a major catalyst one way or another.
From monetary policy in the United States to Chinese consumer trends, many factors are rocking Alibaba’s stock. Until revenue drops, here’s what to expect.
The big picture
Alibaba’s investors were taken on a wild ride. The company lost nearly 50% of its market value in 2021 as it came under the hammer of regulators in Beijing as part of a broader crackdown on China’s tech sector. The signs of slowing growth that appeared in the group’s latest results did not help matters much.
Early 2022 brought mixed messages. The year started strong, with investors appearing to buy into the sharp decline in the share price, betting that the worst was over and, surely, it couldn’t get any worse. But impending interest rate hikes from the Federal Reserve and a tighter monetary policy environment have pressured the market lately, hitting high-growth companies like Alibaba.
The most recent red flag for the company came from a wave of target price cuts in January, following indications of a drop in Chinese consumer spending.
China’s National Bureau of Statistics reported slower consumer goods retail sales growth in October and November. Analysis by a team at investment banking firm Benchmark also showed that December may have seen further weakness in consumer demand in China, amid macro headwinds and a resurgence in Covid cases. -19.
This could hit Alibaba harder than its peers, as the group relies more on discretionary spending in cosmetics and electronics. Alibaba also relies on a portion of its revenue from merchant advertising on its platforms, which would be squeezed out if sellers face budget cuts due to lower consumer spending.
nuts and bolts
Analysts polled by FactSet expect Alibaba to post sales of $38.8 billion, generating earnings before interest, taxes, depreciation and amortization – the preferred adjusted measure of profit – just under $7.1 billion. dollars, or earnings per share (EPS) of $2.52.
Like other high-growth stocks, whose valuations hinge on much more earnings going forward, momentum is important. Investors want to see sales in particular grow at a steady pace; even a seemingly positive number should be taken in this context.
Estimated revenue would mark 13% growth from the December 2020 quarter. Profits on an adjusted basis are actually expected to fall 25% from a year ago, when e-commerce in the era of the Covid-19 pandemic was on a tear, but be more than 60% higher than the September quarter.
As is typical of market reactions to quarterly reports, a surprise up or down either side of key sales or earnings figures is likely to be accompanied by a follow-on move in the price of the stock. ‘action.
Similar to earnings numbers, Alibaba’s outlook is critical. The reduced guidance was one of the main reasons the stock fell in November, when the group reported its latest earnings.
The February 24 release will cover the last three months of 2021, which represents Alibaba’s third fiscal quarter ending March 2022. The upcoming results are likely the last time the company will provide an update on the how she sees the full- end of the year.
In May, Alibaba forecast more than $146 billion in sales for the year ending March 2022, which would have represented nearly 30% year-over-year growth. It has since significantly reduced that figure, predicting revenue growth of 20% to 23%. Another forecast revision would likely be accompanied by a decline in the stock price.
4 numbers to watch
Gross Merchandise Volume (GMV) represents the total value of merchandise traded on Alibaba’s platforms during the quarter. It should be a macro-indicator of consumer behavior. Expectations are high: analysts expect GMV to reach nearly $403 billion, the highest level on record and 10% higher than the same quarter a year ago.
Customer management revenue (CMR) accounted for 36% of Alibaba’s total sales in its most recent quarter. CMR comes from services such as marketing on Alibaba’s platforms, and is expected to slow if merchants reduce their budgets. The company reported $11.1 billion in CMR in the September quarter.
International trade represents a growth segment for Alibaba, and a segment on which analysts at Goldman Sachs and others are optimistic. Expectations are for $2.5 billion in revenue from international sales, up 6% from the September quarter and 16% higher than a year ago.
Cloud computing is another increasingly important segment for Alibaba. When its last earnings release, cloud revenue of $3.1 billion represented 33% annual growth; a similar growth spurt in the cloud would be a welcome bonus in Alibaba’s reports.
Is the stock a buy?Analysts are generally bullish on Alibaba stock. The company’s average target price among brokers is $188.09, implying more than 50% upside from Thursday’s closing level. But existential risks remain for the company, including the regulatory environment on both sides of the Pacific.
Write to Jack Denton at [email protected]