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Will E-Commerce Growth Aid Alibaba (BABA) in Q2 Earnings?
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Alibaba Group Holding Limited (BABA - Free Report) is set to report second-quarter fiscal 2019 results on Nov 2. In the last reported quarter, the Chinese e-commerce giant delivered a negative earnings surprise of 5.43%.
The surprise history has been decent in Alibaba’s case. The company surpassed estimates in two of the trailing four quarters, with an average four-quarter positive surprise of 5.20%.
Coming to price performance, shares of Alibaba have lost 18% on a year-to-date basis compared with the industry’s decline of 0.6%.
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 RMB69.2 billion (US$10.5 billion), increasing 61% year over year. The top line is expected to further increase, driven by innovation in data technology, widespread application of big data, as well as increasing validation for Taobao and Tmall portals.
Strong Mobile Growth
In the fiscal first quarter, Mobile Monthly Active Users (MAU) were 634 million, reflecting an increase of 20% year over year and 3% 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, it has been witnessing an increase in monetization rates over the past few quarters. The company is building its online marketing inventory on both mobile and PC, and is likely to continue recording higher monetization rates, thereby boosting Alibaba’s profits.
Growing Cloud Momentum
In the fiscal first quarter, revenues were RMB4.7 billion (US$710 million), increasing 93% year over year.
The figure is expected to further increase in the to-be-reported quarter, driven by growth 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 core e-commerce business.
Also, increasing competition from companies like Amazon.com Inc. (AMZN) and Jd.com (JD), among others, as well as deceleration of growth in the e-commerce market, both domestically and internationally, could impact its 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 #3 and an Earnings ESP of -4.34%, which does not indicate a likely positive surprise. 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
Generac Holdings Inc. (GNRC - Free Report) has an Earnings ESP of +3.19% and a Zacks Rank #1.
Advanced Micro Devices, Inc. (AMD - Free Report) has an Earnings ESP of +17.12% and holds a Zacks Rank #3.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Will E-Commerce Growth Aid Alibaba (BABA) in Q2 Earnings?
Alibaba Group Holding Limited (BABA - Free Report) is set to report second-quarter fiscal 2019 results on Nov 2. In the last reported quarter, the Chinese e-commerce giant delivered a negative earnings surprise of 5.43%.
The surprise history has been decent in Alibaba’s case. The company surpassed estimates in two of the trailing four quarters, with an average four-quarter positive surprise of 5.20%.
Coming to price performance, shares of Alibaba have lost 18% on a year-to-date basis compared with the industry’s decline of 0.6%.
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 RMB69.2 billion (US$10.5 billion), increasing 61% year over year. The top line is expected to further increase, driven by innovation in data technology, widespread application of big data, as well as increasing validation for Taobao and Tmall portals.
Strong Mobile Growth
In the fiscal first quarter, Mobile Monthly Active Users (MAU) were 634 million, reflecting an increase of 20% year over year and 3% 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, it has been witnessing an increase in monetization rates over the past few quarters. The company is building its online marketing inventory on both mobile and PC, and is likely to continue recording higher monetization rates, thereby boosting Alibaba’s profits.
Growing Cloud Momentum
In the fiscal first quarter, revenues were RMB4.7 billion (US$710 million), increasing 93% year over year.
The figure is expected to further increase in the to-be-reported quarter, driven by growth 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 core e-commerce business.
Also, increasing competition from companies like Amazon.com Inc. (AMZN) and Jd.com (JD), among others, as well as deceleration of growth in the e-commerce market, both domestically and internationally, could impact its 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 #3 and an Earnings ESP of -4.34%, which does not indicate a likely positive surprise. 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.
AMETEK, Inc. (AME - Free Report) has an Earnings ESP of +0.71% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Generac Holdings Inc. (GNRC - Free Report) has an Earnings ESP of +3.19% and a Zacks Rank #1.
Advanced Micro Devices, Inc. (AMD - Free Report) has an Earnings ESP of +17.12% and holds a Zacks Rank #3.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>