Earnings look ahead – Alibaba

New York Stock Exchange-listed Alibaba group will report its fiscal second quarter performance before the United States (US) market opens on Friday.

Although the July to September period is usually a quieter sales period for the e-commerce company, investors and analysts will be looking at the e-commerce giant’s quarterly results and forward-looking statement to get an indication of consumer spending behaviour that will shape sales for the near term.

Investors are also likely to look at Alibaba’s company outlook for the next six months of its fiscal year, and if it is on track for its revenue growth targets.

A survey by FactSet expects Alibaba to report earnings per share (EPS) of US$1.06, down from US$1.29 EPS a year ago. Revenue is expected to be at US$12.5 billion.

Lowered price target on China-dependent website

Analysts have been lowering Alibaba’s price targets over recent weeks, saying that the Chinese domestic-market dependent e-commerce giant will see slower sales as consumer spending power crimps on a soft wage growth and tightening lending environment.

UBS analyst Jerry Liu, for example, had lowered the price target for Alibaba from US$230 to US$220, considering the macro environment conditions. The backdrop of the ongoing US-China trade-war and fears on the trade war could also cause consumers to tighten their purse strings.

China’s retail sales data for July and August showed a slowdown in e-commerce spending. According to Alibaba’s annual reports, the bulk of Alibaba’s revenue comes from the China market.

Alibaba is China’s most valuable tech company. Its stock is down 23% over the past 12 months, and lower by 21% year-to-date. On Thursday, Alibaba closed 6.3% or US$8.97 higher, at US$151.25.

Update on investments

Analysts are also anticipating for updates on the performance of Alibaba’s new investments to improve retail and web content, such as the new Taobao interface.

The new Taobao interface operates on a recommendation-driven function from the earlier version of a search-based platform and its curated design is expected to increase sales.