China-based technology giant Alibaba (NYSE:BABA) will report its financial results for the June-ended quarter (Q1) on Thursday, August 10. While the softer consumption trends and increased competitive headwinds could continue to hurt its prospects, easier year-over-year comparisons will likely support its growth.
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During the previous quarter’s conference call, the company revealed that it witnessed a gradual recovery in consumption trends in China. However, consumer confidence and spending power need further momentum. In addition, Alibaba’s management highlighted that the competition continues to remain fierce “among the multiple consumption platforms.”
On July 10, Citi analyst Alicia Yap reiterated a Buy on BABA stock and increased the price target to $149 from $144. The analyst expects easier year-over-year comparisons, higher gross merchandise volume at Taobao and Tmall, and promotions to support Alibaba’s Q1 results despite the low pace of recovery in consumption.
Against this backdrop, let’s delve into analysts’ consensus estimates for Q1.
Here’s What Alibaba’s Consensus Estimates Indicate
Wall Street analysts expect Alibaba to post revenue of $31.29 billion in the June-ended quarter compared to $31.08 billion in the prior-year period. The consensus estimate shows only a marginal improvement in Alibaba’s top line as a slow recovery, heightened competition, and uncertainty in the Cloud business continues to pose challenges.
Nonetheless, an improvement in sales will likely cushion its bottom line. Analysts expect Alibaba to deliver earnings of $2.03 per share compared to EPS of $1.75 in the prior-year period. Further, the consensus estimate indicates a quarter-over-quarter improvement in its bottom line.
Is Alibaba a Good Stock to Buy Now?
Unlike its technology peers in the U.S., Alibaba stock has not participated in this year’s recovery rally. However, analysts remain upbeat on Alibaba stock ahead of Q1 earnings.
With 13 out of 14 analysts recommending a Buy on Alibaba stock, it has a Strong Buy consensus rating. The average BABA price target of $142.71 implies 51.46% upside potential.
Options Traders Expect a 6.02% Earnings-Related Move
Options traders are pricing in a +/- 6.57% move after BABA’s earnings report, which is greater than the previous quarter’s earnings-related move of -5.41%. The anticipated earnings move is determined by computing the at-the-money straddle of the options closest to the expiration after the earnings announcement.
Learn more about TipRanks’ option tool here.
