What to expect from Alibaba earnings amid trade war concerns

Alibaba will report its fiscal first-quarter 2019 earnings early on Thursday. Source: Bloomberg/Bloomberg

Alibaba (BABA) is scheduled to report its fiscal first-quarter 2019 earnings on Thursday before the markets open.

Wall Street analysts are generally expecting the Hangzhou, China-based online retail giant to report earnings-per-share of $1.22 on revenues of $11.76 billion — up from earnings-per-share of $1.15 on revenues of $7.29 billion during the same period last year.

Although the stock is down 3% year-to-date over concerns around the U.S trade war with China, many analysts are optimistic that Alibaba has positioned itself well for long-term growth thanks to its strong core retail business, its digital payments platform AliPay, and a recent string of smart investments. It could also benefit from new growth areas like Alibaba Cloud, which is rapidly growing but still lags behind competition such as Amazon (AMZN) and Microsoft (MSFT) in market share.

Management could also address how investments are affecting margins, given a whirlwind of investment activity in recent months. This April, Alibaba completed the acquisition of the food delivery startup Ele.me for an undisclosed amount. In May, Alibaba, Cainiao Network and other investors invested nearly $1.4 billion for a 10% stake in ZTO Express, an express-delivery company. Two months later, Alibaba also invested $2.2 billion in Focus Media, a Chinese outdoor advertiser, to expand its advertising beyond its online platforms.

Morgan Stanley tech analyst Grace Chen remains bullish on Alibaba and raised her price target on Alibaba from $230 per share to $240 per share.

“We believe in its long-term potential as the new retail ecosystem matures, despite near-term margin pressure,” Chen wrote in a report.

Likewise, Baird senior research analyst Colin Sebastian maintains an Outperform rating on Alibaba with a $220 per share price target.

“While Alibaba is a growing e-commerce company in the world’s most populous country, the company’s influence across the digital landscape continues to expand,” Sebastian wrote in a report. “In particular, we note a string of acquisitions and internal investments that are broadening the revenue mix and investment profile.”

Also expected: management weighing in on consumer retail spending and ad spending in light of investors’ concerns that the U.S trade war with China could have adverse effects on the business.

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