Alibaba’s
quarterly results, due Wednesday, come at a chaotic time, with Chinese markets in the midst of a volatile stretch because of continuing concerns about the health of the world’s second-largest economy. Earnings from the e-commerce and cloud-computing company could add to the fear—or help a recent bounce in stock prices to continue.
Alibaba
is expected to report earnings of 2.39 Chinese yuan (34 cents) a share on revenue of 261 billion yuan ($36.7 billion) in the December quarter, based on the expectations of analysts surveyed by FactSet. Results in line with estimates would represent a 1% decline in earnings from a year earlier, with a gain of 5% for revenue.
If those growth numbers seem anemic—a far cry from the days of Alibaba’s double-digit sales growth—it is because they are. The company and its core domestic e-commerce business have been hit hard by China’s economic slowdown over the past year. Not only does Alibaba face pressure because consumers are less willing to spend, budget-friendly rivals such as PDD are competing for their money.
Alibaba has had a tough few years. Beijing’s regulatory crackdowns on tech and Covid-19 lockdowns wreaked havoc on its stock, sending the price down more than 70% from a late-2020 peak to the start of 2023. A recovery expected last year never materialized as China’s economy stagnated and came under further strain from the country’s sprawling and indebted property sector.
Alibaba stock has continued to fall, losing more than a quarter of its value in the past 12 months.
The start of 2024 has brought few changes: Chinese stocks remain volatile as investors worry over the economy and hope that effective government stimulus will finally materialize. Alibaba’s quarterly earnings could add color to the picture as results from the core e-commerce business offer signals about wider consumption trends.
Positive news could help prolong recent gains—Alibaba stock was up 3.7% on Tuesday—while a disappointment could slam on the brakes. Tech names like
JD.com,
PDD,
and
Baidu
are especially likely to be affected.
A secondary focus will be on the company’s cloud computing and artificial intelligence arm. Exports of high-tech chips to China have collapsed amid geopolitical tensions with the U.S., hurting Alibaba’s cloud and AI division and scuttling its plans to spin off the business.
Spinoff or restructuring plans more broadly could also play an important role in Wednesday’s release. Alibaba announced last March that it would split itself up, transforming from a conglomerate to holding company in a bid to unlock value for shareholders, including spinning off a number of its businesses. The issue with chips shelved its plans for the cloud division, but a wider drying-up of Chinese capital markets has put other spinoffs in jeopardy, too.
Alibaba has used its earnings releases as an opportunity to break news about its restructuring, so another update on Wednesday wouldn’t be a surprise. Even if surprises are the last thing that investors want right now.
Write to Jack Denton at jack.denton@barrons.com
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