Alibaba set to report steady growth in third quarter, bolstering investor confidence after rough two years
- Analysts expect improved performance from Alibaba last quarter after two years of investigations, geopolitical tension, and a rough economic climate at home
- Expected growth of about 4 per cent is far from the double digits Alibaba used to report, but it is taken as a good sign amid flagging consumer confidence
Since then, Alibaba’s stock price in Hong Kong has fallen to about HK$80 (US$10.20), down more than 70 per cent from its peak of HK$307 in October 2020.
The days of 30 per cent annualised revenue growth are likely over for Alibaba, but a report reflecting solid business performance expected on Thursday could assure investors that the company remains a safe bet for tapping into China’s consumer market and the future of its technology sector, analysts said.
Alibaba owns the South China Morning Post.
“A positive revenue growth in the September quarter should not be a hard thing for Alibaba. Even though the actual results may not go beyond expectations, it is likely to return to a growth track,” said Carmen Zhu, a senior analyst at research firm Leadleo.
Alibaba’s revenue for the quarter ended September is estimated to have reached 209.2 billion yuan (US$29.6 billion), a 4.3 per cent increase from the same period last year, according to a Bloomberg survey. Adjusted net income may fall 4 per cent.
Alibaba shares in Hong Kong have gained nearly 30 per cent from a low earlier this month. But its previous decline is in line with the bearish sentiment that has hit other Big Tech stocks in China.
Sentiment is low in the tech sector globally, as well, as industry giants brace for an expected recession.
As the US Federal Reserve fights inflation, rate increases have also contributed to fears of a recession. Cheng Yu, a researcher at the Beijing-based research institute Kandong, suggested this might help some aspects of Alibaba’s business.
“The contractionary effect of the Fed has not yet manifested,” he said. “This is also good for Alibaba’s cross-border business.”
Improved domestic consumption in the third quarter could also help Alibaba’s results, Cheng noted.
“While macro headwinds and subdued consumer sentiment weighed on Alibaba China’s commerce retail GMV [gross merchandise value] growth in the first half year of 2022, we expect to see a gradual recovery in 2023, which will also provide additional support for earnings recovery,” analysts at CMB International wrote in a research note in late October.
“Despite short-term headwinds, Alibaba’s international expansion and long-term cloud business are on track,” they noted.
LeadLeo’s Zhu suggested that Alibaba still faces multiple risks even though the company has stable fundamentals. “Risks lie in the uncertainty brought by the pandemic, and the slowing growth of [the retail] industry, as well as fierce competition,” Zhu said.
“The US review and the valuation of Ant Group, as well as its strategic investments, are all uncertain factors,” she added.