Alibaba Group Holding Ltd Q4 Earnings Preview

Chinese e-commerce behemoth Alibaba is scheduled to release its fiscal fourth-quarter results on Thursday, May 7 before the U.S. markets open. Alibaba doesn’t have a long history as a public company. Analysts revised their price targets and EPS estimates for Alibaba downward after its Q3 revenue missed the consensus estimates on January 29.

MKM Partners trims EPS estimate

For the March quarter, Wall Street expects the Hangzhou-based company to report $2.78 billion in revenue, up 44% from a year ago period. Its earnings are expected to come in at $0.42 per share. MKM Partners has sounded a cautious note ahead of earnings. MKM has reduced its EPS estimate for March quarter from 51 cents to 44 cents, which is still above the consensus estimate. The research firm expects Alibaba to report $2.64 billion in Q4 revenue, down from the previous estimate of $2.72 billion.

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MKM Partners has also reduced its gross merchandise volume (GMV) growth estimate for Q4 from 45% to 40%. The research firm noted that Alibaba has redoubled its efforts to fight counterfeit goods by imposing stricter criteria on Taobao and Tmall merchants. The week-long Chinese New Year holiday in February will also affect its Q4 revenue. MKM has slashed its price objective from $125 to $115, though it maintains a Buy rating on the stock.

Alibaba’s revenue growth to decelerate significantly

Deutsche Bank analyst Alan Hellawell said in a research note that increasing mobile adoption will reduce Alibaba’s growth rate. Mobile is expected to account for 47% of all transactions on Alibaba platforms in the March quarter, up from 42% in Q3. Advertising makes up a major chunk of Alibaba’s revenue, and mobile generates less ad revenue than desktop platform.

Deutsche Bank expects Alibaba’s Q4 revenue to grow 37% YoY, a significant deceleration from 53.7% growth in December quarter. MKM Partners said Alibaba has been “one of the worst performing stocks” heading into the earnings report. The consensus price target on Alibaba is $107.20, according to data from FactSet.

Alibaba shares fell 3.26% to $77.96 at 10:29 AM EDT on Tuesday.