Alibaba Set to Report Fourth-Quarter Earnings: What Wall Street’s Saying

NEW YORK (TheStreet) -- Alibaba (BABA) is set to report earnings for the financial quarter ended March 31 on Thursday and investors will be looking to see if the company rebounds following a weaker-than-expected third quarter.

Last quarter, the Hangzhou, China-based company reported revenue of $4.22 billion and non-GAAP earnings per share of 81 cents, missing analysts' expectations for revenue but surpassing expectations for earnings. The revenue misses were particularly surprising given that the quarter included Singles Day, which tends to attract an enormous amount of sales in China.

According to Thomson Reuters, analysts expect Alibaba to report fourth-quarter revenue of $2.78 billion and non-GAAP earnings per share of 42 cents. The company itself did not provide guidelines for the quarter.

Alibaba has had its share of troubles since its initial public offering, with lots of media attention for fraud and brushing taking place on its site, plus a recent flare-up over a job posting looking for a " programmer encouragement specialist" who is attractive and comparable to the Japanese porn star Sora Aoi. Alibaba also drew some questions when Executive Chairman Jack Ma announced a hiring freeze, saying the company was growing too quickly.

Here's what analysts had to say about Alibaba, ahead of the results.

Rob Sanderson, MKM Partners (Buy, $115 PT)

"Sentiment is near-term cautious and long-term positive. There have been several downward estimate revisions. We are also lowering our forecast on lower [gross merchandise value] growth assumptions and a lower take-rate. We assume that stepped up efforts to remove counterfeit goods has a measurable impact on GMV this quarter. We now reflect a more severe deceleration in GMV growth to 40% from 45% previously. We assume entities selling counterfeits are not paying BABA for marketing services and therefore see negligible impact to revenue.

BABA has been among the worse performing stocks in the sector heading into its earnings report (down 18% since last report vs. Nasdaq up 8%). We think the confluence of a major lock-up expiration, a monetization back-step and reports of fraudulent activity by some merchants have elevated investor concern. An earnings miss is widely expected, in our view. We believe all are transitory issues and see significant upside as they cycle through."

Youssef Squali, Cantor Fitzgerald (Buy, $100 PT)

"We expect BABA to report strong [fourth-quarter, fiscal-year 2015] results both on the top and bottom lines, powered by solid growth in core China retail marketplaces. We expect $97.13B (+40% Y/Y) in GMV on China retail marketplaces, across both Tmall and TaoBao, driven by strong active buyer growth (+~4% Y/Y).

Given the rapid growth in mobile (which has lower monetization vs. desktop), we expect monetization to decrease again ~9% Y/Y (to 1.97%), resulting in 27% Y/Y growth in China retail revenue (to $1.911M or 70% of total revenue)."

Robert Lin, Morgan Stanley (Overweight)

"Alibaba posted a transcript of its chairman's (Jack Ma) April 23 speech on its Laiwang social messaging app. In the speech, Jack Ma guided for a headcount freeze in 2015 for Alibaba, which grabbed the headline. Most interpreted the message as a hint of potential earnings pressure in the near term, with the need to control costs after rapid growth. We think Jack Ma's speech was 'lost in translation' by the media.

For the most part, we think the speech was meant to rally and show commitment to the new members of the group (as well as old members) that are located outside of the Hangzhou HQ. Specifically, he mentioned that Beijing houses some of the most important business units that he categorized as "Other Internet Services", which are not well known among Alibaba's six other categories of: 1) eCommerce, 2) Ants Financials, 3) China Smart Logistics, 4) Big Data & Cloud Services, 5) Advertising Services; and 6) Cross Border. By 2019, the year of its 20th anniversary, he believes Alibaba will have become a completely different company, driven by these business units (e.g., UCWeb) that help Alibaba to move beyond core eCommerce.

We agree with the company that such restructuring would be necessary for Alibaba to become adaptive to a rapidly changing competitive landscape. Long term, Ma envisions Alibaba being involved in all aspects of SME businesses and serving two billion customers globally (up from its one billion customer target set in 2009)."

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