Earnings Preview: Alibaba likely to report mixed results for Q4

Alibaba Group Holding Limited (NYSE: BABA) will be reporting fourth-quarter 2024 financial results next week. Over the years, the e-commerce giant successfully diversified its business and emerged as a major cloud player, but growth slowed down lately amid economic uncertainties in China and a decline in enterprise spending on technology.

This week, shares of Alibaba regained strength after languishing below the 52-week average for nearly six months. Market watchers, in general, are bullish on the stock’s prospects as they anticipate a continued uptick in the coming months, and recommend investing in BABA. The 12-month average target price is slightly above $100.

Q4 Report Due

On average, analysts following Alibaba estimate that the company earned $1.4 per share in the March quarter, on an adjusted basis, compared to $1.5 per share in the corresponding quarter of 2023. They are looking for a 4% increase in Q4 revenues to $30.33 billion. The report is slated for release on Tuesday, May 14, at 6:30 a.m. ET.

A few years ago, Alibaba’s business was hit by a crackdown by the Chinese government on tech companies, and the company’s stock is yet to recover from that. To get back on track, the company embarked on an extensive restructuring. Though the management revealed plans to spin off the cloud business as part of the reorganization, later it was canceled citing the trade restrictions imposed by the US government.

As far as long-term growth is concerned, the steady uptick in e-commerce penetration in China bodes well for the company, but the market is also witnessing intense competition. At the same time, the cloud business stands to benefit from the fast-paced digitization of the economy. The company is investing heavily in technology, with a focus on AI, to tap into new opportunities and catalyze growth.

Q3 Outcome

In the third quarter, Alibaba’s main operating segments, which together account for more than 98% of total revenues, expended year-on-year. Revenues of the core Taobao and Tmall Group business increased a modest 2%. Total revenues moved up 5% to $36.7 billion in Q3 but slightly missed estimates. Net income plunged about 68% year-over-year to $2.03 billion or $0.80 per ADS. Adjusted earnings per ADS dropped 2% to $2.67.

“We believe that improving the platform’s overall shopping experience and service quality will lead to increased purchase frequency and materially improve the efficiency of user growth. Today, Taobao and Tmall remain the most valuable shopping platforms and the main place for merchants to do business. With the comprehensive capability planning — building planned for 2024, we’re confident that TTG will return to growth,” said Alibaba’s chief executive officer Eddie Wu during the Q3 earnings call.

Alibaba’s stock has declined sharply after hitting an all-time high in 2020. The stock traded higher during Monday’s session, continuing the recent uptrend.