Alibaba Will Report Q4 Earnings Amid a US-China Trade War
Alibaba Will Report Q4 Earnings Amid a US-China Trade War
Can the Chinese e-commerce giant impress? Here’s what traders should know ahead of the earnings call.
- Alibaba (BABA) is scheduled to report Q4 earnings before the market opens on May 15.
- Tariffs and trade concerns are in focus for investors as the Chinese e-commerce giant prepares to make its announcement.
- The company’s stock traded above its key exponential moving averages going into earnings.
Alibaba (BABA) is set to report fiscal fourth quarter earnings on Thursday, May 15, before the market open.
The Chinese e-commerce giant has had a roller coaster of a year, with the stock price rallying over 80% from January to March before falling 35% after the US shifted to more-restrictive trade. Since the April low at 95.73, BABA has managed to trim nearly half of its losses from March, rallying over 30% amid a broader uptick in sentiment. Some positive vibes on the trade front offered the market a reason to get long as traders headed into the weekend.
The earnings will also serve as a proxy for the health of Chinese consumers who face deflation and headwinds from US-imposed tariffs. These trade restrictions could hamper Alibaba’s cloud computing segment if the availability of chips works its way into operations for the March-ended quarter.
The Cloud Intelligence Group saw resurgence in growth last quarter, with a 13% year-over-year growth rate. Eddie Wu, chief executive officer (CEO), noted that artificial intelligence product growth would continue to accelerate. That said, investors will be looking for that acceleration to continue, especially given the market’s focus on AI.
What do investors expect?
Analysts anticipate earnings per share (EPS) to cross the wires at $1.73, which would be up from an EPS of $1.40 last year, according to TradingView. Last quarter, BABA reported an EPS of $2.93, but that included holiday spending.
Revenue is expected to rise to $32.9 billion from $30.7 billion a year ago. Last quarter, BABA reported revenue of $38.37 billion for the holiday-focused quarter.
Analysts are strongly bullish on BABA stock, with 54 strong buy and buy ratings, three hold ratings and only one strong sell rating. The average one-year price target is at 165.63, representing a 31.7% increase from the current stock price.
Trading BABA arnings
Alibaba traded with an implied volatility rank (IVR) of 40.3, meaning volatility is slightly reduced compared to the past 12 months of trading. According to the May 16 expiration—which is a day after its earnings announcement—the market expects a move of +/- 9.37 points, or about 7.5% of the current stock price.
Traders who expect the stock price to stay within the expected move may opt to employ an iron condor with the short legs slightly outside of that expected move. For more directionally motivated traders, selling a put spread or call spread offers tactics to play a bullish or bearish bias.
Technically, BABA stock is in a strong position, trading above its 9- and 21-day exponential moving averages (EMAs). However, prices failed to clear above the tested 50-day simple moving average (SMA) on Thursday, which was surrendered in early April.
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Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. #@fxwestwater
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