Alibaba (BABA) - Get Report is set to announce its earnings for the quarter ending Dec. 31 on Thursday before the market opens, and analysts are hoping to get some more details on the company's recent investments.
For the previous quarter ending in September, the Hangzhou, China-based company reported revenue of $3.5 billion, up 32% year over year, with earnings per share of 57 cents. For the December quarter, analysts are expecting revenue of $5.1 billion, with earnings of 88 cents per share, according to averages from Thomson Reuters.
The high expectations stem from from the fact that this quarter included Singles Day, the biggest online shopping day of the year in China. For the 24 hour period of Nov. 11, Alibaba brought in $14.3 billion in sales, up over 50% from the $9.3 billion generated on Singles Day in 2014.
Other positives in the recent quarter include new content partnerships and acquisitions, such as a deal with Disney (DIS) - Get Report and an acquisition of China's version of YouTube, Youku Tudou, plus the hiring of a new executive to focus on combating counterfeit.
However, according to Thomson Reuters, Alibaba is expected to post its slowest quarterly year-over-year revenue growth on record, much lower than its biggest competitor JD.com (JD) - Get Report . For the quarter, Alibaba is expected to grow its revenue 26.6% over 2014, compared to JD's expected revenue growth of around 47% to 51%. JD is newer and starting from a smaller base, so it's natural that it would achieve higher growth rates, but the shift hints that the playing field may be evening out between the two companies.
On top of that, Alibaba shares have dropped around 32% in the past 12 months. Those problems plus global concerns about China's economy translate to impatient investors waiting to hear good news from Alibaba.
Here's what analysts are saying about Alibaba.
Bob Peck, SunTrust Robinson Humphrey (Buy, $100 price target)
"While the macro headwinds discussed in the Sept. quarter remain, we feel the market has reasonably discounted these risks. We believe Alibaba will report GMV growth of ~28% and revenue growth ~29% driven by improvements in monetization, mobile, and targeting. Further, we anticipate Alibaba will continue its efforts to provide increased disclosure around these investments and the value they deliver, as well as the impact to the core business."
Tian X. Hou, T.H. Capital (Buy, $84 price target)
"The company has been working on its new strategy to improve the quality and GMV of its Tmall platform, clean up Taobao while increasing its monetization. We believe the strategy can show good results in this quarter.
"As the company is working out of its issues, such as mobile adoption rate, monetization rate and GMV growth, we believe the hardest time is almost behind BABA and the company can start to see stable margin and growth."
Youssef Squali, Cantor Fitzgerald (Buy, $90 price target)
"While sales on Singles day (11/11) were strong, macro concerns around China's economy, health of the Chinese consumer and competition remain key issues. Longer-term, BABA remains a key beneficiary of the growing consumption of a growing middle class in China, and rising cross-border trade, in our view."
Jialong Shi, Nomura (Buy, $91 price target)
"We are forecasting 30% y-y top-line growth to CNY34bn, versus Bloomberg consensus of 26% y-y. The stronger revenue could be attributable to a higher take rate for its China retail business.
"Ali's share price has dropped 32% in the past 12 months, vs. a 19% decline for the MSCI China index. We think macro concerns were a big catalyst for the sell-down, because Ali is generally deemed as a China proxy due to its size and high profile. But China's domestic consumption should remain strong for the next decade, backed by the growing middle class. E-commerce should be a direct beneficiary of this, and we forecast a 33% CAGR in GMV over 2015-17E. We believe the micro gains for Ali should outweigh the macro impacts."