Alibaba Set to Disclose Q2 Earnings Amid International Growth
Alibaba Group Holding Limited (BABA) will announce its second-quarter fiscal 2025 earnings on Nov. 15.
The Zacks Consensus Estimate expects revenues to reach $33.47 billion, marking an 8.63% increase compared to the same quarter last year.
For earnings, analysts project a figure of $2.26 per share, which reflects a rise of 5.61% from the prior year’s results. Moreover, this estimate has risen by 8.1% in the last 30 days.
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Historically, Alibaba has shown mixed results regarding earnings. In the last quarter, the company achieved an earnings surprise of 2.73%. In the past four quarters, it outperformed the Zacks Consensus Estimate three times while missing once, with an average surprise of 3.71%.
Earnings Surprises: An Overview
Alibaba Group Holding Limited price-eps-surprise | Alibaba Group Holding Limited Quote
Earnings Predictions
Currently, our model does not clearly indicate a likely earnings beat for Alibaba this quarter. A positive Earnings ESP, combined with Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) can suggest a potential beat, but that’s not the situation here. Presently, BABA shows an Earnings ESP of 0.00% and a Zacks Rank of #1.
You can find the complete list of today’s Zacks #1 Rank stocks here.
Key Factors to Watch for Q2
The International Digital Commerce Group at Alibaba is likely to perform well, propelled by strong momentum in its key platforms. The company’s international e-commerce sectors, including AliExpress, Trendyol, and Alibaba.com, are expected to benefit from strategic investments and growing brand awareness.
Integrating AI technology has enhanced user experience with advanced features such as multilingual searches and personalized recommendations. This integration, along with the AI Business Assistant, has bolstered Alibaba’s connections with small and medium-sized enterprises (SMEs) worldwide.
International trade initiatives, particularly the Alibaba Guaranteed platform, have gained traction by easing operations for SMEs and improving supply chain reliability. Additionally, the new Logistics Marketplace aimed at U.S.-based SMEs is likely to have positively impacted their international commerce performance.
Domestically, Alibaba’s retail business, led by Taobao and Tmall Group, remains robust despite ongoing economic challenges in China. The ‘Star Cube Plan,’ a collaboration between Taobao and Tmall Group with Douyin, is designed to convert Douyin users into active buyers, boosting platform traffic.
Meanwhile, the logistics and cloud segments present varied indicators. The Cainiao Smart Logistics Network thrives on strong domestic services while Alibaba Cloud continues to make gains in sectors like financial services, education, and automotive. However, its aggressive pricing strategy, which includes significant discounts for international customers, could influence revenues even as it works to capture more market share.
Nonetheless, Alibaba faces stiff competition from cloud leaders such as Amazon (AMZN), Microsoft, and Google, which complicates its expansion efforts.
Stock Performance & Valuation Metrics
Year-to-date, Alibaba shares have appreciated by 18.4%, although they trailed behind the Zacks Retail-Wholesale sector, which returned 25.4%, and the S&P 500 index, which rose by 26.3%. In comparison to its peer JD.com (JD), which posted a 25% increase, Alibaba outperformed PDD Holdings (PDD), which saw a 22.2% decline year-to-date.
Year-to-Date Price Comparison
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Evaluating the current stock price, it appears undervalued with a forward 12-month P/S ratio of 1.49X, which is lower than the industry average of 1.8X.
Valuation Metrics Compared
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Investment Perspective
As Alibaba prepares for its second-quarter fiscal 2025 earnings announcement, it presents a notable investment prospect. The international commerce growth from platforms like AliExpress and Trendyol, combined with advancements in AI and strengthened ties with SMEs, offers strong growth potential. Domestically, strategic initiatives like the partnership with Douyin enhance its e-commerce efficacy, while Cainiao’s logistics network shows promise for continued development. Though facing Chinese economic headwinds, Alibaba is positioned for potential growth through its various initiatives and multi-faceted revenue streams.
Final Thoughts
Before Alibaba’s second-quarter fiscal 2025 earnings call, investors might find it beneficial to consider the company’s growth potential in international commerce, cloud services, and logistics. Its dedication to AI technology, combined with expanding global operations and competitive pricing strategies, indicates a commitment to capturing revenue opportunities. Despite challenges in China’s economy, Alibaba’s strategic partnerships and diverse revenue streams suggest a favorable outlook for long-term growth, making current valuations appealing for investors.
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