Although Geo political tension looms, Alibaba Group Holding Limited seems to be a good place as China continues its economic recovery from COVID-19.
Alibaba reported fiscal first quarter earnings on Thursday morning.
When it was addressed to investors in mid-May last year, it was already seeing an increase in volume similar to epidemic levels, and its chances were further increased by its “6.18” midyear buying in June. The value of 6.18 orders settled through Alipay on Alibaba’s TML Global marketplace was 43% from a year earlier, according to a company blog post following the incident.
According to Oppenheimer analyst Jason Helfstein, with this momentum, Alibaba’s June-quarter volume was expected to increase, ahead of the December quarter. Alibaba is “still focused on helping merchants overcome COVID-19, and revenue growth is expected to be slower than [gross-merchandise volume],” She wrote.
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Beyond the big buying trend, analysts are encouraged by encouraging Chinese government data on online sales of physical goods in June, though they will be looking for comment on more recent trends, as July data showed little growth Showed recession, up 25.5% from 24.5%.
Another issue to watch will be the company’s outlook on the weakening relationship between the US and China, particularly in the field of technology. The White House has recently been taking a tight line on the Chinese app, with President Trump issuing executive orders that give Chinese company BiteDance 90 days to divest assets related to its popular Tickcock service and that of Tencent Holdings Ltd. 700 calls for closure. ,
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The Trump administration also wants strict auditing standards for Chinese companies that list their shares on the US stock exchanges. Alibaba’s chief financial officer Maggie Wu said on the company’s May earnings that Alibaba’s financial statements are prepared in accordance with “US GAAP” accounting standards and that the company will “strive to comply with any law intended to protect investors and Transparency is on. Those who buy securities on the US stock exchanges. ”
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what to expect
Revenue: Analysts at FactSet’s survey believe that Alibaba generated revenue of RMB 148 billion, about $ 21.37 billion in the June quarter, from RMB 114.9 billion a year earlier.
Income: The Factorset consensus in adjusted earnings per year calls for RMB 13.82, a year before RMB 12.55.
stock movement: Alibaba shares have dropped the day of the company’s last three earnings reports, but so far this year the shares are up 22%. The Cranchers CSI China Internet ETF KWEB,
The S&P 500 is up 41% at that time as SPX,
Has increased by about 5%.
What else to see
“Given the apparent recovery of Chinese consumer spending, coupled with a sign of stability in e-commerce growth, we believe that Alibaba is well positioned to accelerate growth over the remainder of the year,” said Bayard analyst Colin Sebastian Written in the note of 16 July customers.
Sebastian sees Alibaba surpassing projections in the June quarter as “an impressive ramp in retail recovery speed and cloud adoption”. He rates the stock on Outperform with a price target of $ 275, and he is excited about the company’s cloud trajectory to drive interest in digital services amid the COVID-19 crisis.
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RBC Capital Markets analyst Mark Mahanai is also encouraged about Alibaba’s potential in the cloud, which he said “represents a very large $ 30 billion to $ 40 billion market opportunity for the company,” although he Hopefully, competition in this business has intensified.
“For FQ1, we expect the cloud to grow by 58% per year to RMB 12.3 billion in revenue, broadly in line with Street, although we believe the move from Tencent to competition segments in the medium term Will lead the way. ”, He wrote. Mahaney has an outperform rating and $ 235 price target on the stock.
Oppenheimer Helfstein said that “it is difficult to reverse the impact of deteriorating US / China relations” but that Alibaba is “well positioned in his view”. The Chinese government’s data to Helfstein indicate that online sales are becoming a large part of overall consumption, a trend he considers sustainable given that new buyers are opening up to the convenience of e-commerce Whereas existing buyers are expanding the categories in which they shop.
Helfstein has an outperform rating and $ 290 price target on the shares.