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Alibaba Group Holding Ltd. is but a few days away from its biggest shopping event of the year, but Singles Day will come amid concerns about whether macroeconomic issues are in China are dampening consumer spending.
In the past few weeks, many analysts have had their Alibaba
Baba, + 5.17%
price targets, arguing that soft wage growth, tightening lending, trade-war fears and lower income from investing in China. UBS analyst Jerry Liu, who reduced his price to $ 220 from $ 230 in mid-October, said his new estimates "more ad-market and consumer-demand weakness given the macro environment.
The September period, Alibaba's fiscal quarter, is not a terribly interesting one for the company, but the e-commerce giant's results and commentary will be closely watched this time around for indications about consumer behavior.
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"We now expect softer core business revenue, mainly due to modestly slower e-commerce industry trends and mix to nonpaid product recommendations (versus paid search)," wrote Oppenheimer's Jason Helfstein, who has an outperform rating and $ 210 price target on shares. Chinese retail-sales data for July and August showed deceleration in e-commerce spending.
Alibaba's outlook for the second half of its fiscal year, Helfstein argues that it is unlikely that the company will be able to reduce its revenue to 60% revenue growth for the year.
Trade-war issues will also be of concern, though some say that it's still too early to get a great read on the situation. "Macro concerns seem more likely to come up anytime soon," wrote MKM Partners analyst Rob Sanderson, who rates the stock with a $ 270 target price. "So far there appears to be negligible impact from tariffs but post-Jan. 2019 is the true test. "
What to expect
earnings: Analysts surveyed by FactSet expects that Alibaba has $ 1.29 a year earlier. According to Estimize, which crowdsources projections from hedge funds, academics, and others, the average estimate calls for $ 1.18 in EPS.
The U.S. currency estimates on FactSet convert RMB to dollars when analysts issue their reports, which may lead to inconsistent currency conversions with figures Alibaba provides, as the company uses the conversion rate of the day. On an Renminbi basis, FactSet calls for recurring earnings per share of 7.39 RMB, down from 8.52 RMB in the year-earlier quarter.
Revenue: The FactSet consensus calls for $ 12.5 billion in revenue, while the Estimize consensus calls for $ 12.8 billion. In the prior September quarter, Alibaba reported sales of $ 8.3 billion.
FactSet projects 86.7 trillion RMB in revenue, up from 54.7 trillion RMB a year earlier.
Stock movement: Alibaba's American depository shares have risen following six of the company's last 10 earnings reports. The stock is down 23% over the past 12 months, while the S & P 500
SPX, + 0.68%
has increased 5.3%.
Of the 50 analysts tracked by FactSet who cover the stock, 49 rate it a buy and just one rates it a hold. The average target price is $ 217.41, 53% above recent levels.
What else to watch for
A key issue in the earnings report will be the company's spending on longer-term initiatives impacts results. Jefferies analyst Karen Chan anticipates "soft profit" for the quarter of the company's "continued investment in new retail & content which helps strengthen Alibaba's e-commerce foothold and deepen offline and online consumer wallet spending in the long term."
Chan has a buy rating and $ 225 target on the shares.
Investors will also be looking for an update on the company's new Taobao interface, which moved from a search-based platform to a more-driven recommendation on the summer. "Macquarie analyst Wendy Huang," wrote Macquarie analyst. "However, it is still in the warm-up and gradual rollout phase; we do not expect it to become a driver and not a drag in the next six months. "
Read: Alibaba stock gains after announcement of repurchase plan
Huang rates at $ 225.
Singles Day Technically does not take place until Nov. 11, Alibaba has already started talking about plans for the event, including efforts to integrate offline commerce into Singles Day. The company may be pressed to share its earnings during the earnings call.
"Looking ahead to 11.11, while some of our checks suggest some uncertainty within certain verticals, our checks expect Alibaba to be very aggressive given this year is the 10th anniversary of the shopping festival and Jack Ma's last 11.11 as executive chairman of the company," wrote Susquehanna Financial Group's Shyam Patil, who rates the stock at $ 220.
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