Alibaba Group Holding Limited, also referred to as the Alibaba Group or simply Alibaba.com, is slated to release their next earnings report on August 3rd.
The multinational technology company that is best known for specializing in things like e-commerce, internet, retail, and even film production has seen its stock on a steady decline for almost a year now, but could this latest earnings report turn things around for Alibaba? Let’s look at what we know.
The Bull Case For Alibaba
After its price per share has dropped by more than $125 since last October, it might seem difficult to make a bullish case for Alibaba (BABA) — after all, when the stock hit just above $315 in late October, this was the highest Alibaba stock had ever been. Dropping down to under $190 since then, the stock has lost more than a third of its value in less than twelve months.
However, a bullish argument does still exist for Alibaba: This drop was actually more of a course correction than an all-out stumble, and the company is projected to enjoy growth from here on out.
Not only that, but the correction offers a lower risk vs pay off tradeoff for bargain hunters. As a matter of fact, Alibaba is now considered undervalued by many expert analysts by as much as 100%. Alibaba is just going to keep making more money, and bullish investors are getting in low while they can.
Revenues continue to rival levels enjoyed by just a handful of companies like the FAANG group in the United States. That puts Alibaba in rare territory where it has an enormous financial buffer to face most any business headwinds and still survive, and even thrive.
Given its strong balance sheet it could be argued that it has a fortress moat, a trusted brand, expansive reach and is virtually indestructible from outside competition.
BABA Earnings Estimates Are Solid
For the company’s fourth quarter that just culminated in June of 2021 (the close of their fiscal year), a group of 21 analysts predict to see an average quarterly revenue of $32.54 billion — this comes from a low estimate of $31.08 billion and a high estimate of $34.09 billion.
While it remains to be seen just how on (or off) the mark these analysts will be about Alibaba’s fourth quarter of 2021, it seems more or less right on the money: For the past four quarters, Alibaba has exceeded expectations, then underperformed, then exceeded expectations, then underperformed. That choppy history is less attractive than a perennial outperformer like Facebook (FB), which continually talks down earnings expectations but beats them consistently.
On the flipside, investors are often given new opportunities to “buy the dip” whereas the same cannot be said for companies like Amazon (AMZN) and Apple (AAPL) that generally power higher absent major economic shocks.
Alibaba Earnings Whisper Number
While these estimates are the ones put out to the public, the whisper number for Alibaba’s sits at $33.5 billion for this fourth quarter.
Surprisingly, while many whisper numbers tend to be more downtrodden, this whisper number for Alibaba actually exceeds the average analyst’s estimate for the company’s quarterly revenue of $32.54 billion.
This just goes to show that Alibaba really is undervalued right now, and the expert analysts are catching onto it.
Why Skeptics May Be Right About BABA
While Alibaba is looking bullish fundamental perspective, there are still plenty of vocal analysts in the bearish corner that would like to be heard. Their main argument is that the Chinese government will surely set a limit on Alibaba that keeps it from reaching its true potential in the long-term, and that relations between the U.S. and China might result in investing in Alibaba becoming an all-out impossibility.
Looming regulations on top of an already blurry line between American companies and Chinese companies (remember the TikTok debacle of 2020?) could mean that those skeptical of Alibaba’s future success might be in the right here.
While there’s no major news on this front right now, it might be a classic case of no news being bad news for Alibaba investors in the near future. Chinese stocks have been hit hard as government crackdowns have affected a number of listed names and BABA has not remained unscathed throughout.
BABA Post Earnings History
In the wake of the past several Alibaba earnings reports, more and more sellers have jumped ship. This is due to the key points of the bearish case, to be sure, but it also has a lot to do with the fact that Alibaba seems to miss its earnings target just as often as it hits it. Lack of confidence in posted earnings reports are reason for jitters.
While Alibaba is poised to exceed expectations during this next earnings call in August, it’s entirely possible that the stock will simply continue to fall regardless of how great the quarterly numbers are. This is the nature of Alibaba stock these days, unfortunately: More seem to be selling than buying, no matter what the numbers say due to concerns over actions that may be taken by the Chinese government.
Will Alibaba Go Up After Earnings?
While it might not be an immediate upturn, many experts seem to be in agreement: Alibaba stock is poised to go up if fundamentals alone were to be considered.
Taking into account the stock’s recent course correction, its significant undervaluation, and its predicted success in the fourth quarter, Alibaba shows all sorts of signs of a looming uptick. This isn’t a guarantee, especially seeing how controversial relations have been between the U.S. and China lately, but in a best-case scenario, Alibaba will hopefully be going up soon. An exceptional fourth-quarter earnings report will only help make this happen sooner rather than later.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.