Alibaba Group Holding Ltd Earnings Preview: Solid Results Expected

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Shares of Alibaba Group slumped as much as 2.84% to $100.02 per share one day ahead of the company’s next earnings report

Alibaba Group is scheduled to release its next earnings report on Thursday, and analysts are generally expecting solid results. In particular, Wall Street is watching the Chinese online retailer’s mobile progress and its monetization rates.

Estimates for Alibaba’s earnings report

Thursday’s report will be for Alibaba’s third fiscal quarter of 2015. In a report dated Jan. 27, Barclays analysts Alicia Yap and Paul Vogel provided their updated numbers for the company.

They expect total net revenue of $4.486 billion, which would represent a 47% year over year growth rate. That’s quite a bit ahead of the Bloomberg consensus estimate of $4.45 billion. They’re looking for a gross margin of 73.5% and adjusted EBITDA margin of 49.1%, compared to the previous quarter’s 66.7% and 50.5% respectively.

The Barclays team expects non-GAAP earnings per share of 73 cents, which is slightly behind the consensus estimate of 75 cents per share. In general, they expect a “solid” quarter from Alibaba thanks to the record gross merchandise volume on Singles Day and strong seasonality, as well as “solid” promotional events.

What to expect on Alibaba’s earnings call

The analysts also provided a list of topics they want to hear more on when Alibaba management holds the earnings call. For example, they want a more in-depth look at the gross merchandise volume trend for both Tmall and Taobao, as well as Alibaba’s overall monetization.

In addition, they want to hear more about the Chinese e-commerce giant’s progress in mobile and its mobile monetization rate and also trends in its operating expenses and margins. They’re also looking for updates on the company’s expansion plans, capital expenditures and investments.

One thing other investors may be curious about is what Alibaba management has to say about Yahoo’s plan to spin off its stake in the company into a separate SpinCo. On the one hand, Alibaba might just want to buy out the new company “to prevent having a discounted version of its stock on the market,” according to a post by staff members of The Wall Street Journal. But on the other, some analysts don’t see much risk if the company doesn’t do anything.

Will Alibaba address fake merchandise issue?

The reason Alibaba shares are probably falling today is because of the Chinese report about the government’s criticism of the company for the fake goods being sold on its sites. The company has been dealing with this issue for a while, but today’s report really brings this issue front and center.

China’s State Administration for Industry and Commerce said today that Alibaba isn’t doing enough to crack down on the sale of fake merchandise on its online properties. It will be interesting to see whether management has anything to say on this topic beyond the criticism they posted on one of Alibaba’s social networking accounts on Tuesday. Today’s report from SAIC appears to have been a response to Alibaba’s public criticism, which was the result of a previous report from the agency.

Looking ahead to the current quarter

Although Alibaba doesn’t provide guidance, the Barclays team did release their estimates for the current quarter. They may update their estimates based on what management says on the earnings call.

For now though, they estimate a 42% growth rate in gross merchandise volume, which they expect to hit RMB 612 billion in the fourth fiscal quarter. They expect total revenue of $2.928 billion, compared to the Bloomberg consensus estimate of $2.917 billion. They’re projecting a gross margin of 71.5% and adjusted EBITDA margin of 47.7%. The Barclays team also expects non-GAAP earnings per share of 47 cents, compared to the consensus estimate of 48 cents.

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