Home / Business / Alibaba Profit: China's weakening effect on spending on electronic commerce is a key factor

Alibaba Profit: China's weakening effect on spending on electronic commerce is a key factor

Given the uncertainty of investors regarding the economic situation in China and the impact of trading volatility, Alibaba Group Holding Ltd. on Wednesday give their opinion on the country's consumer spending.

Chinese e-commerce giant is expected to release third-quarter results ahead of Wednesday's market opening. The company's holiday season results will show whether it has suffered from a general slowdown in e-commerce spending reported by the Chinese government for the December quarter.

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Baird analyst Colin Sebastian said that Alibaba

BABA, -0.68%

could be more volatile than others over some of the macroeconomic issues affecting its spending, as particularly important items such as electronics and home appliances were affected by China's slowdown. Recently, he reduced his estimates for Alibaba's March end of the fiscal year "to reflect a less supportive macroeconomic backdrop in China."

Sebastian noted that growth had picked up somewhat in December, so investors should pay attention Management's careful note Comment on the backgrounds for signs of recovery. He rates the stock at an indicative price of $ 178 for outperformance.

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What to Expect

Earnings: Analysts Interviewed by FactSet Project Alibaba posted adjusted earnings of $ 1.69 per share in the December quarter, compared to $ 1.63 a year earlier. According to estimates from Crowd sources from hedge funds, scientists and others, the average projection forecast is $ 1.67 per share.

FactSet's US dollar currency estimates convert RMB into dollars at the time analysts issue their debt. This may result in inconsistent currency conversions that are reported by Alibaba as the company uses the conversion rate from the last day of the quarter. On a renminbi basis, the FactSet consensus requires earnings per share of RMB 11.42 (RMB 10.26).

Revenue: FactSet analysts claim $ 17.6 billion in tax revenue for the third quarter, compared to $ 12.8 billion a year ago. The estimated consensus is $ 17.3 billion. In terms of renminbi figures, analysts surveyed by FactSet expect sales of RMB 119.1 billion in the December quarter, compared to RMB 80.3 billion in the same period of the previous year.

Stock Movement: Alibaba's US Depository Shares rose after five of the shares The company's last 10 profit reports. Equities rose 11% in the last three months, compared to a 0.7% decline in the S & P 500 index

SPX, -0.11%

. Of the 53 analysts surveyed by FactSet who track the stock, 52 have buy ratings and one sales note. The average price target of $ 204.27 is 28% higher than the recent one.

Things to Remember

Alibaba's cloud computing business will again be in focus this quarter, even though it accounts for a small portion of the company's total revenue of approximately 7%. "We believe that the company's focus in the cloud is still growing customer and market share, not profitability," said Mark Mahaney, an analyst with RBC Capital Markets, who rates the stock with a target price of $ 200.

Margin commentary on cloud business and other areas of Alibaba are of key interest to MKM Partners analyst Rob Sanderson. He expects Alibaba's competitors to reduce their "spending intensity" for the current calendar year. He is interested in Alibaba's spending plans for video content and food delivery, both of which weigh on the company's margins.

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As for the Alibaba cloud segment, Sanderson predicts that the company is "approaching its margin." a buy rating and a $ 245 target for Alibaba shares.

Analysts are also looking for updates to the company's "new retail initiatives" that focus on linking online and offline commerce. The company operates Hema grocery stores, which are modeled on the online / offline concept. Jefferies analyst Karen Chan is interested in the steps that Alibaba could take to support the long-term margin profile of these efforts, which they believe could include a delivery fee for each online order. Chan rates the shares with a price target of $ 195 at the purchase price.

The holiday accommodation included Singles Day, the biggest shopping event of the year. Alibaba endeavored to include Ele.me, its grocery store, and Hema, the "new retail stores," in its Singles Day offerings. Look for management updates to see if the shopping extravaganza has had a lasting impact on the use of these Alibaba services.

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Also watch out for comments on Alibaba.com, the business-to-business Platform of the company. Alibaba has further developed the platform to make it more like a marketplace, in the model of the consumer sites of Tmall and Taobao.

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