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Will E-Commerce Growth Aid Alibaba (BABA) in Q1 Earnings?
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Alibaba Group Holding Limited (BABA - Free Report) is set to report first-quarter fiscal 2019 results on Aug 23. In the last reported quarter, the Chinese e-commerce giant delivered a positive earnings surprise of 3.41%.
The surprise history has been decent in Alibaba’s case. The company surpassed estimates in three of the trailing four quarters, with an average four-quarter positive surprise of 13.01%.
Coming to price performance, the company’s shares have gained 2.1% compared with the industry’s rally of 42% on a 12-month basis.
Strength in Alibaba’s Core Commerce Business
This segment comprises marketplaces operating in retail and wholesale commerce in China, and international commerce. Revenues in the last reported quarter were RMB51.3 billion (US$8.2 billion), increasing 62% year over year. The top line is expected to further increase, driven by innovation in data technology, widespread application of big data, and increasing validation for Taobao and Tmall portals.
Strong Mobile Growth
In the fiscal fourth quarter, Mobile Monthly Active Users (MAU) were 617 million, reflecting an increase of 22% from the prior-year quarter and 7% sequentially. The number is expected to expand further, driving revenues for the company. This is because of the increased adoption of mobile devices by consumers as the primary method of accessing Alibaba’s platforms.
Additionally, over the past few quarters, it has been witnessing an increase in monetization rates. The company is building its online marketing inventory on both mobile and PC, and is likely to continue witnessing higher monetization rates, thereby boosting Alibaba’s profits.
Growing Cloud Momentum
In the fiscal fourth quarter, revenues were RMB4.4 billion (US$699 million), increasing 103% year over year. Alibaba Cloud launched 316 new products and features to enable small and large enterprises for achieving higher computing performance, and storage capability.
The figure is expected to further increase in the to-be-reported quarter, driven by an increase in the number of paying customers and higher-than-usual spending by them, reflecting increased usage of services.
Overhangs Remain
Concerns remain in the form of rising expenses associated with new business initiatives, increasing logistics, food delivery and order-fulfillment costs. The company is willing to spend plenty of cash on its new retail initiatives, which management has identified as key growth drivers apart from its core e-commerce business.
Also, increasing competition from companies like Amazon.com Inc. (AMZN) and Jd.com (JD), among others, and deceleration of growth in the e-commerce market, both domestically and internationally, could impact results in the soon-to-be-reported quarter.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided, especially when the company is witnessing negative estimate revisions.
Alibaba has a Zacks Rank #4 and an Earnings ESP of -5.84%, making surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Alibaba Group Holding Limited Price and EPS Surprise
Hewlett Packard Enterprise Company (HPE - Free Report) has an Earnings ESP of +3.65% and a Zacks Rank of 3.
Syntel, Inc. has an Earnings ESP of +0.42% and a Zacks Rank #2.
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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Will E-Commerce Growth Aid Alibaba (BABA) in Q1 Earnings?
Alibaba Group Holding Limited (BABA - Free Report) is set to report first-quarter fiscal 2019 results on Aug 23. In the last reported quarter, the Chinese e-commerce giant delivered a positive earnings surprise of 3.41%.
The surprise history has been decent in Alibaba’s case. The company surpassed estimates in three of the trailing four quarters, with an average four-quarter positive surprise of 13.01%.
Coming to price performance, the company’s shares have gained 2.1% compared with the industry’s rally of 42% on a 12-month basis.
Strength in Alibaba’s Core Commerce Business
This segment comprises marketplaces operating in retail and wholesale commerce in China, and international commerce. Revenues in the last reported quarter were RMB51.3 billion (US$8.2 billion), increasing 62% year over year. The top line is expected to further increase, driven by innovation in data technology, widespread application of big data, and increasing validation for Taobao and Tmall portals.
Strong Mobile Growth
In the fiscal fourth quarter, Mobile Monthly Active Users (MAU) were 617 million, reflecting an increase of 22% from the prior-year quarter and 7% sequentially. The number is expected to expand further, driving revenues for the company. This is because of the increased adoption of mobile devices by consumers as the primary method of accessing Alibaba’s platforms.
Additionally, over the past few quarters, it has been witnessing an increase in monetization rates. The company is building its online marketing inventory on both mobile and PC, and is likely to continue witnessing higher monetization rates, thereby boosting Alibaba’s profits.
Growing Cloud Momentum
In the fiscal fourth quarter, revenues were RMB4.4 billion (US$699 million), increasing 103% year over year. Alibaba Cloud launched 316 new products and features to enable small and large enterprises for achieving higher computing performance, and storage capability.
The figure is expected to further increase in the to-be-reported quarter, driven by an increase in the number of paying customers and higher-than-usual spending by them, reflecting increased usage of services.
Overhangs Remain
Concerns remain in the form of rising expenses associated with new business initiatives, increasing logistics, food delivery and order-fulfillment costs. The company is willing to spend plenty of cash on its new retail initiatives, which management has identified as key growth drivers apart from its core e-commerce business.
Also, increasing competition from companies like Amazon.com Inc. (AMZN) and Jd.com (JD), among others, and deceleration of growth in the e-commerce market, both domestically and internationally, could impact results in the soon-to-be-reported quarter.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided, especially when the company is witnessing negative estimate revisions.
Alibaba has a Zacks Rank #4 and an Earnings ESP of -5.84%, making surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Alibaba Group Holding Limited Price and EPS Surprise
Alibaba Group Holding Limited Price and EPS Surprise | Alibaba Group Holding Limited Quote
Stocks to Consider
You may consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank.
HP Inc. (HPQ - Free Report) has an Earnings ESP of +1.19% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hewlett Packard Enterprise Company (HPE - Free Report) has an Earnings ESP of +3.65% and a Zacks Rank of 3.
Syntel, Inc. has an Earnings ESP of +0.42% and a Zacks Rank #2.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>