Seeking validation: Alibaba’s earnings to be heavily scrutinised

Quarterly report card to be studied for several reasons

SAN FRANCISCO/ BEIJING:

Alibaba Group Holding Limited’s first full quarterly report card to Wall Street investors will be scrutinised by the hopeful seeking validation for lofty stock price targets and studied by the few skeptics searching for inauspicious signs.

Coming off Alibaba’s record-breaking $25 billion IPO in September, the company’s shares have remained 45 per cent above their debut price. It has a dominant position in a $450 billion Chinese market.

Investors have been too eager to overlook a structure that critics say allows its management extraordinary decision-making power, potentially to the detriment of shareholders. Instead, their focus is on Alibaba’s profit margins, among the fattest in the global e-commerce industry.

“The stock is now trading at a pretty high multiple, they need to show really strong results out of the gate,” said Wedbush Securities’ Gil Luria.

While major shareholder Yahoo Inc. has included basic figures such as Alibaba’s revenue and earnings per share every quarter, Tuesday marks the Chinese company’s first full-fledged results release.

Net profit is expected at $1.17 billion in the quarter ended September, according to a Thomson Reuters Smart Estimate poll of 21 analysts. Fully reported earnings per share are forecast to be at 36 cents.

Expanding

Alibaba has spent significant sums acquiring firms and start-ups in some of the fastest-growing mobile markets and has made select acquisitions in the US. It is also making moves to more closely resemble its US peer, including establishing a cloud service that provides storage and computing (Aliyun), and a budding online video service.

Alibaba’s dominance of Chinese commerce has piqued interest in America. Apple Inc. CEO Tim Cook has said he would be happy to work with Ma.

Ultimately, what investors want to see is top line growth. Alibaba is expected to post revenue of about $2.7 billion in the September quarter, up about 52% from a previously reported $1.78 billion a year earlier. “There’s going to be scrutiny of every number,” Wedbush Securities’ Luria said. 

Published in The Express Tribune, November 4^th, 2014.

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