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Alibaba Group (BABA) is scheduled to report results of its fiscal fourth quarter of FY24 before the U.S. market opens on Tuesday, May 14, and will hold a conference call to discuss the results at 7:30 a.m. U.S. Eastern Time the same day. What to watch for:

MORE AGGRESSIVE SPENDING: Last quarter, Alibaba reported Q3 adjusted EPS of $2.67, missing the consensus forecast of $2.69, on revenue of $36.7B that was nearly in-line with the consensus estimate of $36.74B.

At that time, Eddie Wu, CEO of Alibaba Group, said: "We delivered a solid quarter as we are executing our focused strategies across the organization. Our top priority is to reignite the growth of our core businesses, e-commerce and cloud computing. We will step up investment to improve users' core experiences to drive growth in Taobao and Tmall Group and strengthen market leadership in the coming year. We will also focus our resources on developing public cloud products and sustaining the strong growth momentum in international commerce business."

In addition, the company announced that its board of directors approved an increase of $25B to its share repurchase program, demonstrating "our confidence in the outlook of our business and cash flow."

After that report, Macquarie downgraded Alibaba to Neutral from Outperform with a price target of $85.40, down from $88.50. Alibaba is balancing defense and expansion, which potentially caps earnings upside for now, the analyst told investors. The firm added that it was reducing its adjusted EBITDA forecasts for Alibaba to reflect more aggressive spending, noting that while it sees some savings from non-core units to partially offset incremental investments, Macquarie also expects group earnings to enter a declining trajectory.

CAINIAO IPO A NO GO: On March 26, Alibaba Group announced that its logistics subsidiary Cainiao Smart Logistics Network Limited has withdrawn its initial public offering and listing application on the Hong Kong Stock Exchange. At the same time, Alibaba Group plans to offer to minority shareholders of Cainiao an opportunity to sell all of the outstanding shares of Cainiao held by them to Alibaba Group for 62c per share, representing a total consideration of up to $3.75B. After completion of the offer, Alibaba Group plans to "align Cainiao's business to better realize strategic synergies with Taobao and Tmall Group and Alibaba International Digital Commerce Group, as well as support Cainiao to execute a long-term strategic expansion of its global logistics network," the company stated.

Subsequently, JPMorgan kept an Overweight rating on Alibaba after the company announced the withdrawal of its logistics subsidiary Cainiao's initial public offering application. Given the challenging capital market environment, pushing the IPO at this time might not be able to achieve the initial purpose of unlocking shareholder value, the analyst told investors. In addition, the firm said cross-border e-commerce now is gaining strong traction, and Alibaba intends to further integrate Cainiao's logistics business with its AIDC group to provide a better user experience for global consumers. With Cainiao likely to step up its infrastructure investment, JPMorgan said it believed Alibaba shares might see near-term pressure considering most investors value the company on an earnings basis. However, given the fast growth of the cross-border ecommerce business, such investment should pay off in the long run, added the firm. It believed the IPO withdrawal was neutral to negative in the short-term, but a long-term positive.

INCREASING COMPETITION WITH PDD AND COUPANG: In mid-March, Goldman Sachs downgraded PDD Holdings (PDD) to Neutral from Buy with a price target of $136, down from $196, as the firm re-assessed its view of the risk-reward given two incremental developments. Namely, the firm cited a rapidly shifting policy landscape around cross-border businesses, including the recent H.R.7521 bill in the U.S. passed by the House Energy and Commerce Committee focusing on foreign apps, and domestic e-commerce peers' re-focus on growth for 2024 as commented in recent earnings, including Alibaba's management having laid out priority in reigniting gross merchandise volume, or GMV, growth in its recent results.

Within days of that downgrade, Nikkei's Kotaro Hosokawa reported Alibaba will invest $1.1B over the next three years to create a logistics network in South Korea, aiming to take on local e-commerce giant Coupang (CPNG) by leveraging low prices and speedy deliveries. Alibaba plans to construct a logistics center this year in a 180,000-square-meter lot, the author notes. A call center with 300 employees also will be formed, as well as a purchasing department to sell local products overseas, aiming to boost exports for 50,000 small South Korean businesses over three years.

In recent days, The Wall Street Journal's Raffaele Huang and Shen Lu reported that bargain app Temu, which is owned by Chinese e-commerce giant PDD Holdings and has been a major advertiser on Meta's (META) Facebook, is shifting business priorities beyond the U.S. as it wants to limit risks and seek other sources of growth. People close to the company told The Journal that Temu is focusing more on acquiring users in Europe and other countries and as a result it now expects less than a third of its sales to come from the U.S. this year, compared with 60% last year, the report said, calling the move "a notable strategy shift for a company that in less than two years became the U.S.'s second-most popular shopping app after Amazon.com by monthly users."

CONSENSUS: In terms of overall results for the March-end quarter, analysts are calling for Alibaba to report total revenue of $30.39B. The consensus Q4 earnings forecast stands at $1.41 per share. For the June-end quarter, analysts' consensus currently calls for revenue of $34.24B and for Alibaba to post a profit of $2.07 per share, according to data from Refinitiv.

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