What Wall Street Is Saying About Alibaba Ahead Of Earnings

Alibaba Group (BABA) is scheduled to report results of its first fiscal quarter of FY23 before the U.S. market opens on Thursday, August 4, 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:

WALL STREET VIEW: On May 26, the Chinese e-commerce giant reported Q4 adjusted EPS and revenue that beat consensus forecasts and said it would not give financial guidance as it typically does at the start of the fiscal year in light of the "risks and uncertainties arising from COVID-19."

Daniel Zhang, Chairman, and CEO of Alibaba Group said at that time: "Alibaba delivered on the goal of serving one billion annual active consumers in China this past quarter and achieved a record RMB 8,317 billion in global GMV for the fiscal year. Despite macro challenges that impacted supply chains and consumer sentiment, we continued to focus on customer value proposition and building the capabilities to deliver value. We saw tangible progress across our businesses, especially in operational improvements in key strategic areas."

The company added that it believes it "will continue to generate strong operating cash flow to maintain strategic flexibility as we calibrate our operations against changing economic and competitive circumstances."

The next day, Benchmark analyst Fawne Jiang lowered the firm's price target on Alibaba to $200 from $220 and kept a Buy rating on the shares. Aside from macro and regulatory headlines, Alibaba shares' underperformance in the past year has primarily been driven by deteriorating monetization of its core marketplace and substantial earnings decline driven by elevated investments, said Jiang, who added that she was positive on the company's commitment to focus on quality growth and optimizing costs. She believes a profit recovery is still achievable in the second half of FY23, which should potentially restore confidence back in the stock.

Barclays analyst Jiong Shao, meanwhile, lowered the firm's price target on Alibaba to $161 from $170 and kept an Overweight rating on the shares. The company reported "solid" Q1 results and a "decent" Q2 outlook, Shao told investors at the time. The analyst added that "once the dust settles," Alibaba should remain a dominant e-commerce platform in China with "impressive earnings power."

More recently, on August 1, BofA analyst Eddie Leung lowered the firm's price target on Alibaba to $155 from $162 and kept a Buy rating on the shares ahead of the company's report on August 4. The analyst estimates revenue declining 3% year-over-year to RMB 199.5B, mainly to reflect the China lockdown impact on multiple businesses. The delisting news in the U.S. remains a source of stock volatility, Leung added. Conversion of Alibaba's secondary listing in Hong Kong to a primary status will mitigate liquidity risk, but related news could remain a source of stock volatility as some American depository receipt investors may not be able to own non-U.S. stocks, stated the analyst.

DUAL LISTING OR DELISTING?: On July 25, Alibaba Group announced that its board of directors has authorized the company's management to apply for a primary listing on the Main Board of Hong Kong Stock Exchange. "After completion of the primary listing process, which is expected to occur prior to the end of 2022, Alibaba will become a dual-primary listed company on the New York Stock Exchange in the form of American Depositary Shares and on the Hong Kong Stock Exchange in the form of ordinary shares," the company stated.

On July 29, the SEC added Alibaba, Mogo (MOGO), Cheetah Mobile (CMCM), and Boqii (BQ) to the provisional list of issuers identified under the HFCAA, or Holding Foreign Companies Accountable Act list. Under the HFCAA, the Public Company Accounting Oversight Board has the responsibility for determining that it is unable to inspect or investigate completely a registered public accounting firm or a branch or office of such a firm because of a position taken by an authority in a foreign jurisdiction. Issuers provisionally identified will have 15 business days to contact Commission staff if they believe they have been incorrectly identified, the SEC noted.

Alibaba has claimed it would "strive" to keep its stock on the New York Stock Exchange despite the potential for the SEC to delist the company along with 200 others in 2024, Oliver Telling of The Financial Times reported. Alibaba said it would "continue to monitor market developments" and that it would "strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange," according to the FT. The U.S. requires audit files to be inspected every three years, but China has recently blocked its companies from providing foreign regulators access to such materials, the report noted.

CONSENSUS: In terms of overall results for the quarter ended June 30, analysts are calling for Alibaba to report total revenue of $30B. The consensus Q1 earnings forecast stands at $1.53 per share. For the September-end quarter, analysts' consensus currently calls for revenue of $31.68B and for Alibaba to post a profit of $1.60 per share, according to data from Refinitiv.

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