What Wall Street experts are saying about Alibaba ahead of earnings

Analysts, and a noted activist, have recently warmed up to the Chinese e-commerce giant

Alibaba Group (BABA) is scheduled to report results of its fiscal third quarter of FY23 before the U.S. market opens on Thursday, February 23, and will hold a conference call to discuss the results at 7:30 a.m. U.S. Eastern Time the same day.

What to watch for:

1. ANALYSTS, ACTIVIST WARM UP TO ALIBABA: In early January, Goldman Sachs added Buy-rated Alibaba to the firm’s Conviction Buy List and raised the price target on the shares to $138 from $133. The analyst said at that time that the firm believed the worst was behind Alibaba after two years of downward earnings revisions, adding that it had the largest room for valuation multiple repair amongst the mega-caps as its top line growth resumes and 2022-2025 earnings return to mid-teens growth.

Later in the month, Citi raised the firm’s price target on Alibaba to $160 from $144 and kept a Buy rating on the shares. Looking into 2023, the analyst sees "upside risks" to a potentially faster than expected rebound of consumption recovery in China. The firm sees the recovery of fundamentals, timely completion of a Hong Kong primary listing conversion and possible approval of stock-connect as further catalysts for Alibaba shares.

In addition, Barclays raised the firm’s price target on Alibaba to $141 from $114 and kept an Overweight rating on the shares. The company’s December quarter results are likely to feature broadly in-line revenue and better margins, the firm told investors. More importantly, Alibaba should finally see growth in gross merchandise volume in the March quarter for the first time in 12 months, according to the analyst.

On January 16, The Wall Street Journal’s Lauren Thomas reported that activist investor Ryan Cohen had built a stake in Alibaba worth hundreds of millions of dollars and was privately pushing the Chinese e-commerce giant to accelerate and further boost its share-repurchase program, People familiar with the matter told Thomas that Cohen, known as the meme-stock king for helping ignite explosive rallies in GameStop (GME) and others, built the stake in the second half of last year, the report added.

2. MA GIVES UP CONTROL OF ANT: Also in January, Ant Group issued a statement that said that in "order to continue to optimize our corporate governance and achieve long-term sustainable development, Ant Group Co., Ltd. has been undertaking several initiatives since 2021." To "further enhance the transparency and effectiveness of our corporate governance and strengthen our independence from our shareholder, Alibaba Group, certain members of our management have exited the Alibaba Partnership," the company noted. "The main result of the Adjustment will be to change the exercise of voting rights of Ant Group’s major shareholders, from Mr. Jack Ma exercising voting rights jointly with persons acting in concert, to each of ten individuals." According to Ant, Ma will see his voting rights shrink from above 50% to roughly 6.2%.

3. SENIOR MANAGEMENT CHANGES: In December, Alibaba Group unveiled senior management changes, including Wu Zeming’s rise to the platform company’s C-suite as CTO. In a separate move, Jeff Zhang will focus on his role as head of the Alibaba DAMO Academy and no longer serve as President of Alibaba Cloud Intelligence, the company stated. "Jeff will continue to be responsible for Alibaba’s proprietary chip development team T-Head and Internet of Things initiatives. In Jeff’s stead, Daniel Zhang, Chairman and CEO of Alibaba Group, will assume the role of acting President of Alibaba Cloud Intelligence and responsibility for the communication and collaboration platform DingTalk. Alibaba regularly reshuffles management annually to keep pace with the evolving internet space and with the growth of the team," the company said.

4. CONSENSUS: In terms of overall results for the quarter ended December 31, 2022, analysts are calling for Alibaba to report total revenue of $35.76B. The consensus Q3 earnings forecast stands at $2.37 per share. For the March-end quarter, analysts’ consensus currently calls for revenue of $31.34B and for Alibaba to post a profit of $1.61 per share, according to data from Refinitiv.

5. SENTIMENT: Click here to check out recent Media Buzz Sentiment on Alibaba as measured by TipRanks.

Keywords: earnings, quarterly earnings, earnings report, Q3