As Alibaba Group Holding Limited prepares to post its first quarterly earnings report as a publicly traded company on Tuesday, Wall Street will be watching for three key developments from the Chinese e-commerce giant:
- Observers are on the lookout for any sign that China’s slowing economic growth is dampening the company’s results.
- In general, investors also want to know whether the company can meet the lofty expectations it created with its record $25 billion initial public offering in September.
- And finally, investors are looking for the company to sketch a more detailed roadmap for its future, and possibly answer questions about its expansion into the U.S. e-commerce arena.
Analysts expect Alibaba to post a 40 percent jump in revenue compared with the July-to-September period a year ago. Wall Street is expecting the company to post a profit of $1.19 billion, or 38 cents a share, on revenue of 2.64 billion, according to analysts polled by Reuters. The company reported net income of $707 million on revenue of $1.73 billion during the same period a year ago.
Alibaba, led by billionaire Executive Chairman Jack Ma, raised $25 billion in the biggest IPO ever. On Sept. 19, the company’s shares began trading at $92.70, a price 36 percent higher than its initial public offering price of $68 a share. On Monday, the stock traded at around $102 per share, more than 45 percent above its debut price. The company is valued at roughly $252.3 billion.
Analysts are watching Alibaba’s growth for the long term to see if it can continue growing at the same pace it did over the last decade. One hurdle the company faces is trying to build a presence in the U.S. market that can compete with retail giants such as Amazon.com. Some ways the company might accomplish that, according to Adam Sarhan, CEO of Sarhan Capital: “They can come to the U.S. and compete directly, or they can shift and start doing strategic acquisitions in order to have a footprint in the U.S.”
There are lots of opportunities for growth for Alibaba, according to Sarhan, and it’s not just U.S.-centric.
“Maybe the U.S. market is saturated, and they want to instead look at India -- or look to another underdeveloped area that is complimentary to what they do and have explosive growth there, whether is Latin America or maybe the Middle East,” Sarhan said.
Another important factor analysts are eyeing: The question of how a slowing Chinese economy will impact Alibaba’s results. Many analysts consider Alibaba to be a barometer for the Chinese economy. Recent data show that China’s economy is growing at its slowest pace in five years, a worrisome sign of global slowdown that could hit the U.S. economy.
“If you want to know when China’s economy is going to hit its crash zone, watch Alibaba’s revenues and earnings,” said Martha Stokes, chartered market technician and chief executive officer of TechniTrader. “Alibaba will be like what GM [General Motors] was to America. Once BABA’s revenues begin to tick down a little bit, that’s a huge red flag.”
Alibaba is expected to discuss its latest earnings report during a conference call on Tuesday, starting at 7:30 a.m. EST.