Market News & Analysis
Alibaba Q4 Earnings Preview
Matt Weller, CFA, CMT February 12, 2020 8:17 PM
Chinese e-commerce giant Alibaba (BABA) reports its Q4 earnings tomorrow morning before the bell, and no matter how you look at it, the fourth quarter was a big one for the company.
In the last three months of the year, Alibaba raised $13B in a secondary listing in Hong Kong, closed at a fresh record high above $210, and set a new record with $38.4B in sales on Singles Day alone. For Americans tracking at home, that’s more than US consumers spent online on Thanksgiving Day, Black Friday, Cyber Monday, and Amazon Prime Day…combined!
In other words, the company’s outlook was looking bright in Q4, and the market has set correspondingly high expectations heading into tomorrow’s earnings release. According to FactSet, analysts are expecting BABA to report $2.27 in EPS (up from $1.82 in Q4 last year) on $22.7B in revenue (up from $17.5B last year). 54 of the 56 analysts tracked by FactSet have “buy” ratings on the stock, with the other two analysts maintaining “hold” ratings, and an overall price target of $242 over the next 12 months.
While the outlook through Q4 was undoubtedly bright, the biggest question on traders’ minds will be around how the outbreak of coronavirus has impacted consumer demand in China. This information will not be in the backward-looking reported figures, but management’s guidance for the year will give insight into the expected scale of the disruption to consumer demand, manufacturing production, and labor delivery. In other words, the company’s outlook moving forward will be the biggest driver for the stock.
Technically speaking, BABA remains in a clear uptrend, recovering relatively quickly from the nearly 15% late-January swoon to trade back above $220. A strong report, with solid guidance for the year ahead, would likely take the stock to fresh record highs above $231; this would mirror the recent earnings-driven breakouts in massive US technology names like Amazon and Microsoft. On the other hand, a disappointing earnings report and acknowledgement that coronavirus is likely to lead to major disruptions throughout the year could take the stock back down toward the psychologically-significant $200 level, which has served as both resistance and support in recent months.
Source: TradingView, GAIN Capital
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.