Alibaba Earnings: Can Q4 Earnings Provide Pivot Point For Beleaguered Investors?

Despite the continuing rout on Chinese stock markets on Monday, shares in Alibaba BABA escaped with only a fractional loss in Hong Kong, while its U.S. listing gained ahead of the e-commerce company’s fourth-quarter earnings report on Wednesday.

In Hong Kong, the shares dipped 0.1%, while Nasdaq-listed shares climbed 3.4% to $74.25 in morning trade.

Could there be some positive news to come on Wednesday that might bring a ray of hope to beleaguered Chinese investors?

There hasn’t been much joy for investors in Alibaba since its market debut in Hong Kong in November 2019. The shares debuted at HK$187 and climbed to a peak of HK$309 in October 2020. But since then it’s been nearly all downhill to its current level at around HK$71.

Also Read: China Market Rout Continues, With Small Caps Feeling The Pain Despite Beijing’s Intervention

Alibaba Q4 Earnings Expectations

Two weeks ago the consensus expectation for Alibaba’s fourth-quarter earnings stood at $2.73 in U.S. dollar terms, down 2.15% from the same period a year ago. Since then, the consensus has dropped to $2.67 a share.

Revenue expectations were $37.68 billion two weeks ago, up 4.9% from a year ago. The consensus now stands at $36.49 billion.

Alibaba’s co-founders Jack Ma and Joe Tsai remain firm believers in the shares. They have been active buyers in recent months, with the pair buying a joint $152 million of the Nasdaq-listed stock, while Ma bought $50 million of the Hong Kong-listed shares.

Dennis Dick, CFA at TripleDTrader and co-host of Benzinga's PreMarket Prep, said two weeks ago: "Part of me wants to buy Alibaba here, because it's a ridiculously low valuation. But it was ridiculously low at HK$90 and then HK$80, and now it's HK$70."

What Could Revive Alibaba Stock?

Much of the decline in the share price has been down to the broad retreat from Chinese equities by foreign investors over the last three years.

This itself has been largely the result geopolitical tensions from trade sanctions between the U.S. and China, and concerns over domestic political meddling in the affairs and stock listings of China’s top companies.

The company’s response to increased competition from the likes of PDD Holdings Inc – ADR PDD, which owns online retailer Temu, and JD.Com Inc JD, was slow, and its results in recent quarters have reflected this.

Under new CEO Eddie Wu, the company has announced restructuring and a new focus to put its e-commerce customers first. Last week, the company announced it was considering the sale of several non-core — and non-profitable — retail assets, including grocery business Freshippo and retailer RT-Mart.

The sale of Freshippo would come at a cost. When it was considering an initial public offering last year — abandoned due to weak investor sentiment — the company was hoping for a valuation of up to $10 billion but had to revise this down to $4 billion.

Like its U.S. peer Amazon.com Inc AMZN, Alibaba has been among the stand-out Chinese companies developing cloud computing capabilities and artificial intelligence.

In efforts to make this more profitable, the company brought in last year a dedicated management team for the operations. Any news on significant growth opportunities here would likely provide a boost.

Now Read: Alibaba Plans to Sell Off Grocery and Retail Assets, Doubles Down on E-Commerce Core

Photo: Shutterstock