Alibaba Group (BABA) is scheduled to report results of its fiscal second quarter of FY24 before the U.S. market opens on Friday, November 15, and will hold a conference call to discuss the results at 7:30 a.m. U.S. Eastern Time the same day. What to watch for:
SHADOW OF UNCERTAINTY: On Tuesday, Mizuho raised the firm’s price target on Alibaba to $113 from $92, while keeping an Outperform rating on the shares. While stimulus policies are driving enthusiasm in China, Asia internet fundamentals remain soft and uncertain, and Mizuho is waiting to see improvements on structural issues such as unemployment and real estate. The firm says the potential for higher tariffs “casts a shadow of uncertainty.” Despite a mixed outlook, it remains positive on outbound travel demand in China and maintain Trip.com (TCOM) as a top pick. Mizuho also sees improving penetration of online services and incremental demand from Chinese travelers continuing to fuel growth in ridesharing and food delivery. With that in mind, it maintains Grab Holdings (GRAB) as a top pick. The firm believes Alibaba’s fundamentals are stabilizing with its checks showing the company’s refocus on consumer experience continues to gain traction.
IN LINE QUARTER: Last month, Barclays raised the firm’s price target on Alibaba to $137 from $107, keeping an Overweight rating on the shares. The firm expects broadly in-line Q3 results from Alibaba. The company’s significant shareholder returns are likely to continue to drive the stock higher, Barclays tells investors in a research note. The firm’s estimates are largely unchanged.
STILL CHEAP ENOUGH TO BUY: After a yearslong malaise, Alibaba Group Holding stock has roared back to life, thanks to China’s recent stimulus plans-and it isn’t too late to buy in, Teresa Rivas of Barron’s wrote earlier this month. Buying now, after Alibaba’s stock has gained 25% to $98.70 over the past three months, feels like arriving late to a very brief happy hour and getting stuck with the bill. Yet China’s economic stimulus plan is also a sign that the government is determined to spur an economic recovery regardless of the cost. Even if this round doesn’t work, Beijing’s willingness to intervene should at least put a floor under consumers. Likewise, policymakers may be less likely to interfere with tech companies, which have been the main economic drivers elsewhere in the world. Alibaba, as a dominant e-commerce and cloud provider in China, should benefit both ways. With a flush balance sheet and a stock trading at 10.7 times forward earnings, it still looks like a bargain, the publication adds.
OUTLOOK: Current consensus adjusted EPS and revenue forecasts for Alibaba’s second quarter stand at $2.08 and $33.15B, respectively, according to data from Bloomberg. The consensus adjusted EPS and revenue forecasts for Alibaba’s third quarter stand at $2.77 and $39.04B, respectively.
SENTIMENT: Check out recent Media Buzz Sentiment on Alibaba as measured by TipRanks.
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