Alibaba Group Holding Ltd Earnings: Will The Tear Continue?

Alibaba Group Holding Ltd (NYSE:BABA) is scheduled to release its first earnings report as a public company tomorrow before opening bell in New York. The Chinese ecommerce giant’s shares have been on a tear since about mid-October when they recovered from the post-initial public offering dip.

Great expectations for Alibaba Group

With such volatility in Alibaba shares, it’s quite possible that there will be a significant movement around tomorrow’s earnings report. Even a slight miss could send the stock plunging. However, Trefis analysts believe the results will be solid, both on the top and bottom lines.

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In a post on Forbes, the Trefis Team said they expect that the number of active buyers on Alibaba is now approaching 300 million. They also see tremendous opportunities for the Chinese online retailer’s expansion, not only in China but also internationally, and expect the number of active buyers to reach 527 million by the end of 2020.

As with other internet companies, they also see mobile as providing a significant growth source for the company in the next several quarters.

What to expect in Alibaba’s earnings report

On average, analysts are expecting Alibaba Group to post $1.16 billion in net profits for the third quarter. That’s a 45% year over year increase. They’re looking for $2.61 billion in revenue, which is also a 45% year over year growth rate.

Juro Osawa of The Wall Street Journal offers a rundown of some other numbers investors should watch for in Alibaba’s earnings report tomorrow. For example, profit margins have been steadily declining, although they remain quite a bit higher than the majority of industry peers.

Alibaba has been spending on expanding its mobile shopping offerings through tablets and smartphones, which has been dragging on margins. The author notes that the company’s operating margin fell from 50.3% in June 2013 to 43.4% this past June. In relation to margins, investors will want to see signs that all those investments in mobile are paying off.

The company is also expected to issue its very first earnings guidance. Analysts are expecting solid numbers because the fourth quarter contains the Nov. 11 discount day, which is Alibaba’s largest shopping event every year. Last year on that day alone, the Chinese online retailer raked in $5.8 billion.

Analysts also want to see signs of growth in Tmall, one of Alibaba’s two main online properties. Tmall hosts some of the world’s largest brands and takes commission for sales made through the site. Analysts are expecting to see more and more major global brands attracted to Tmall and watch growth in the online property drive revenue growth for Alibaba.