What To Expect From Alibaba’s Q1 Earnings After A Strong End To Fiscal 2018

Alibaba (NYSE:BABA) is scheduled to announce its fiscal Q1 2019 earnings on Thursday, August 23. The e-commerce giant reported a strong set of results through fiscal 2018 ended March, with high double-digit year-over-year growth in revenues across segments. While recent acquisitions (Lazada, Youku Tudou, Cainiao) have fueled growth in some segments, Alibaba has also sustained impressive growth across its core commerce business. Going forward, this growth is expected to continue through the current fiscal year, with high double-digit revenue growth across segments. However, the company’s efforts to expand internationally, integrate acquisitions and spend on fast-growing revenue streams such as Digital Media and Innovation Initiatives is expected to take a toll on its profit margins. We have created an interactive earnings preview dashboard for Alibaba where we have summarized our expectations for the company’s Q1 FY’19 results. If you disagree with our forecasts, you can change expected segment revenue and margin figures to gauge how it will impact expected EPS for the full year.

For the June ended quarter, we forecast core commerce revenue (including retail and wholesale in domestic and international markets) combined to increase 35% y-o-y to ¥58 billion ($8.5 billion). While the company has been successful in capturing a significant portion of the domestic online retail market (which is a ¥6.6 trillion, or just over $1 trillion, market), Alibaba intends to foray into offline retail as well in the coming years. This should help drive growth in the long run. Similarly, we forecast Digital Media and Entertainment revenue (mainly from Youku Tudou) to increase at 35% to ¥5.5 billion ($800 million). In addition we expect Cloud Computing to continue to outpace overall growth, with a 70% increase in revenues to just over ¥4 billion ($600 million). We forecast adjusted EBITDA margins to be slightly lower than comparable prior year levels at just over 44%. Accordingly, we forecast net income and EPS to be around 8-10% higher on a y-o-y basis to ¥22 billion ($320 million) and ¥8.30 ($1.20), respectively.

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