Alibaba (NYSE:BABA) will release its Q4 (quarter ended March 31, 2024) financials in early May. While the Chinese e-commerce giant’s efforts to ensure competitive pricing may boost volumes and drive its top line, they will also exert pressure on its profitability in the upcoming quarter.
During the Q3 conference call, Alibaba’s leadership said that the company has strengthened its efforts to enhance price competitiveness across its online retail platforms, Taobao and Tmall. This initiative has facilitated the acquisition of new users and the retention of existing ones, resulting in an overall improvement in purchase conversion rates.
Though these measures could weigh on BABA’s profitability in the short term, a lower share count due to aggressive stock buybacks will likely cushion its EPS. With this backdrop, let’s look at analysts’ recommendations ahead of the Q4 print.
Analysts Expect Profits to Remain Under Pressure
Citi analyst Alicia Yap reiterated a Buy rating on Alibaba stock on April 9. However, she cut the price target to $124 from $126 ahead of Q4 earnings. Yap indicated that the company’s investments in enhancing the user experience and a low-price strategy should boost order and merchandise volume growth in Q4. However, these efforts are also expected to elevate pressure on its adjusted EBITA in the near to mid-term.
Similarly, J.P. Morgan analyst Alex Yao lowered BABA stock’s price target to $100 from $105 on April 9. However, the analyst maintained a Buy rating and recommended buying BABA stock on weakness. Yao expects losses to widen in BABA’s international commerce and Cainiao’s business in Q4. Nevertheless, he expects international e-commerce and Cainiao’s revenue growth rate to remain healthy.
Q4 Expectations for BABA Stock
Analysts expect Alibaba to report revenue of $30.37 billion in Q4, reflecting a slight improvement over sales of $30.32 billion reported in the prior-year quarter.
Meanwhile, analysts expect the company to post earnings of $1.53 per share in Q4, compared to $1.48 in the previous year’s quarter.
What Does the Future Hold for Alibaba?
Alibaba stock is down over 27% in one year and has underperformed the broader equity markets, reflecting macro headwinds in China. Nonetheless, Wall Street is bullish about BABA stock.
Alibaba stock has 15 Buys and three Holds for a Strong Buy consensus rating. Analysts’ average price target on BABA stock is $104.66, implying a 43.39% upside potential from current levels.
