Alibaba Revenue Seen Higher; Chinese Economy in Focus -- Earnings Preview
29 January 2019 - 11:29PM
Dow Jones News
By Yoko Kubota
Chinese e-commerce giant Alibaba Group Holding Ltd. will report
fiscal third-quarter earnings before the U.S. market opens
Wednesday. Analysts expect the New York Stock Exchange-listed
company to post a rise in revenue, with solid demand for items
including apparel and cosmetics and a steady growth in commissions
from vendors, helping to buck China's economic slowdown. Meanwhile,
it is expected to post a decline in net income, as investments into
new business areas as well as spending on content for its online
video platform and other costs weigh on profitability. Here is what
to look for:
EARNINGS FORECAST: Analysts polled by FactSet expect the
Hangzhou-based company to report a 8.5% drop in net income to 21.35
billion yuan ($3.16 billion), compared with 23.33 billion yuan from
the same period a year earlier.
REVENUE FORECAST: Alibaba is expected to post 119.08 billion
yuan in quarterly revenue, up 43.4% from 83.03 billion yuan a year
earlier, the poll showed.
What to Watch
CHINA'S SLOWDOWN: In 2018, China's economy expanded at its
slowest annual pace since 1990. Many companies, including Apple
Inc., have warned about the impact from China's deceleration.
Alibaba runs China's two largest online retail platforms, Taobao
and Tmall, and so its results serve as a barometer for China's
consumer economy. Investors are all ears for what Alibaba
executives say about the economy and any fallout from U.S.-China
trade tensions. They would also be looking for signs Alibaba is
tightening its belt.
CORE COMMERCE: Despite the slowdown, Alibaba in November sold a
record $30.8 billion worth of goods for Nov. 11's Singles Day.
Investors are eager to understand how much Chinese consumers are
paring back spending and for what types of purchases. Last week,
Alibaba Executive Vice Chairman Joe Tsai said demand for smaller
items such as apparel, consumer staples and fast-moving consumer
goods like toiletries has continued to be strong despite slowdown
of big-ticket items such as cars. "People are, sentiment-wise,
tending to be a little bit more conservative, but it's not a
disaster scenario," he said.
OUTSIDE BETS: Alibaba has aggressively invested in businesses
beyond online retail, including food delivery and bricks-and-mortar
stores, moves that have weighed on profit margins. Mr. Tsai last
week suggested that Alibaba will be more conservative with future
investments. "Of course we are going to be selective. We are going
to be disciplined in some cases, but aggressive in other cases. In
the areas we feel we want to invest, we will continue to invest
very aggressively," he said. Signs of where Alibaba could be
cutting back and where it is pouring money into will be closely
scrutinized.
Write to Yoko Kubota at yoko.kubota@wsj.com
(END) Dow Jones Newswires
January 29, 2019 07:14 ET (12:14 GMT)
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