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Q2 Earnings Preview for Alibaba (NYSE:BABA)

in EARNINGS/INVESTING IDEAS by

Alibaba Group Holding Limited (NYSE:BABA) is scheduled to report Q2 earnings results before markets open for trading on November 5, 2020.

The company is expected to report earnings of 元14.09/share on revenue of 元155.2 billion. The consensus earnings per share (EPS) of 元14.09/share is based on a poll of 25 analysts and represents a growth in eps of 7.5% over the same quarter last year, when the company reported earnings of 元13.10/share.

The revenue forecast of 元155.2 billion based on a poll of 30 analysts implies a year-over-year (YoY) growth in revenue of 30.4%. Last year the company reported 元119 billion in revenue for the quarter.

Expected to report EPS growth of 7.5% for Q2, 2021
Metric Expected Prior Year YoY Change
Revenue 元155,231.64 元119,017.00 30.4%
EPS 元14.09 元13.10 7.5%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Alibaba Group Holding Limited for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q1, 2021 元13.56 元14.82 9.3% Beat
Q4, 2020 元6.07 元9.20 51.6% Beat
Q3, 2020 元15.70 元18.19 15.9% Beat
Q2, 2020 元10.68 元13.10 22.7% Beat
Q1, 2020 元10.48 元12.55 19.8% Beat
Q4, 2019 元6.50 元8.57 31.8% Beat
Q3, 2019 元11.51 元12.19 5.9% Beat
Q2, 2019 元7.64 元9.60 25.7% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 2.0%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 20, 2020 $260.59 $265.80 2.0% Increase
August 20, 2020 $260.59 $265.80 2.0% Increase
August 20, 2020 $260.59 $265.80 2.0% Increase
August 20, 2020 $260.59 $265.80 2.0% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.12, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.12 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Alibaba Group Holding Limited is currently trading at $310.15/share, down −2.2% for the day. The company is trading at approximately 97.1% of its 52-week high of $319.32/share. The company’s stock price is up 16.7% since the last earnings report and up 0.7% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 69.53 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:BABA Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 32.01 and a forward P/E multiple of 32.16.

Alibaba Group Holding Limited’s current share price also implies a price-to-book (P/B) multiple of 6.95. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2021.Q1
Period End Date June 30, 2020
Stock Price (Current) $310.15
P/E Ratio 32.0x
P/E Ratio (Fwd) 32.2x
PEG Ratio 0.5
Total Debt / Total Capital 2.5%
Levered Free Cash Flow 元149.9 billion
EV / EBITDA 34.6x

Finbox

Alibaba Group Holding Limited is a large-cap stock with a market capitalization of $858.1 billion and a total enterprise value of $840.2 billion. The company operates in the Consumer Discretionary sector and the Internet & Direct Marketing Retail industry.

Alibaba Group Holding Limited, through its subsidiaries, provides online and mobile commerce businesses in the People’s Republic of China and internationally. It operates through four segments: Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives and Others. The company operates Taobao Marketplace, a mobile commerce destination; Tmall, a third-party online and mobile commerce platform for brands and retailers; Alibaba Health Internet platforms for pharmaceutical and healthcare products; Alimama, a monetization platform; 1688.com and Alibaba.com, which are online wholesale marketplaces; AliExpress, a retail marketplace; Lazada, an e-commerce platform; and Tmall Global, an import e-commerce platform. It also operates Lingshoutong, a digital sourcing platform; Cainiao Network logistic services platform; Ele.me, a delivery and local services platform; Koubei, a restaurant and local services guide platform; and Fliggy, an online travel platform. In addition, the company offers pay-for-performance and display marketing services; and Taobao Ad Network and Exchange, a real-time bidding online marketing exchange. Further, it provides elastic computing, database, storage, virtualization network, large-scale computing, security, management and application, big data analytics, and Internet of Things and other services for enterprises; payment and escrow services; and movies, television series, variety shows, animations, and other video content. Additionally, the company operates Youku, an online video platform; Alibaba Pictures and other content platforms that provide online videos, films, live events, news feeds, literature, music, and others; Amap, a mobile digital map, navigation, and real-time traffic information app; DingTalk, a business efficiency app; and Tmall Genie, an AI-powered smart speaker. The company was founded in 1999 and is based in Hangzhou, the People’s Republic of China.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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