What Is Alibaba’s Outlook Like Post-Earnings?

by Trefis Team
Alibaba Group
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Alibaba (NYSE:BABA) seems to be feeling the impact of the U.S.-China war, leading to a 4-6% reduction in the company’s guided revenue range for fiscal 2019. After September saw the announcement of Jack Ma’s eventual retirement, the company’s recently reported fiscal Q2 results saw a revenue miss. While the company’s EPS beat consensus estimates, its revenue came in slightly below expectations.

We currently have a price estimate of $173 per share for Alibaba, which is around 15% higher than the current market price. Our interactive dashboard on Alibaba’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.

The downward revision may be more of a cautionary measure to insulate against any shocks to investors. Alibaba stated that the reduction was primarily due to the company’s decision to not monetize the incremental inventory on its Chinese retail marketplaces.

Performance And Expectations By Segment

In Alibaba’s core commerce business, Taobao, Tmall and Retail continue to do well. As part of initiatives to enhance efficiency, the company combined the operations of its restaurant discovery (Koubei) and food delivery (Ele.me) businesses. In addition, the company continues to invest in last mile delivery through Cainiao Network’s Post collection stations and self-pick-up lockers. Alibaba also continues to grow its international retail business, and the company tied up with the Russian Direct Investment Fund (RDIF), Russia’s sovereign wealth fund.

In the cloud computing business, an improving mix of services and customer growth contributed to 90% y-o-y growth in the business. Alibaba continues to enhance its cloud operating system functionality and IoT integrations. Meanwhile, the media division witnessed 100% y-o-y growth in subscribers on the back of increasing user engagement.

Overall Alibaba’s business remains healthy, benefiting from organic growth as well as synergies arising due to the ownership of media, food and e-commerce businesses. We expect the company’s strategy to help maintain its leadership position in China, and also help it successfully expand internationally.

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