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4 key considerations ahead of Alibaba’s Q4 2020 earnings

Here are four pivotal points that investors should know ahead of Alibaba Group’s earnings release on 22 May 2020.

When is Alibaba Group’s Q4 FY2020 financial results out?

Chinese technology titan Alibaba Group is set to announce its fourth quarter earnings for the three months ended 31 March 2020 before the US market opens on Friday 22 May 2020.

Here are four things that investors should know ahead of the upcoming financial report.

1. Alibaba’s earnings beat analyst estimates for the first three quarters

Analysts polled by Factset have given a consensus earnings per share (EPS) estimate of US$2.55 per American depository share (ADS) alongside expected revenues of US$107.6 billion for the e-commerce conglomerate’s Q4 2020 results.

For shareholders, it is probably also worth noting that the group’s actualised earnings for the first three quarters of 2020 all surpassed Wall Street’s initial EPS projections. Q1’s reported EPS came in 21.81% higher than estimates, Q2’s final EPS beat estimates by 21.87% and Q3’s EPS ended up 14.35% higher.

Additionally, reported revenues for the three quarters were in line with broker targets.

In terms of share price, Alibaba’s ADS price is up 1.5% year-to-date. The stock’s performance was particularly affected in February and March 2020 during the peak of the coronavirus outbreak.

The 12-month median share price target for Alibaba Group is US$64.51 per share, based on Factset estimates tallied from 52 analysts. This represents a 15.81% upside from the last traded share price. Of these ratings, 49 brokers have rated the stock a ‘buy’, three have rated it ‘outperform’, while four have given it a ‘hold’ rating.

According to IG data, Alibaba shares have recovered over 6% of their value since mid-March and are trading at US$216.25 a share as at the close of Monday 18 May 2020.

IG is a world-leading online trading and investments provider for thousands of financial markets. With CFDs (read all about CFDs here), you can buy long or sell short on Alibaba and other Chinese tech stocks depending on whether you think prices will rise or fall. Start today by opening an IG account.

2. No guidance regarding Covid-19 in Alibaba’s Q3 update

Alibaba’s Q3 financial results were released on 13 February 2020, roughly a month after the first reports of the coronavirus outbreak in China were published.

While the company did not provide any detailed guidance regarding the pandemic’s business impact, it did issue the following statement:

‘In response to the coronavirus, we mobilised Alibaba ecosystem’s powerful forces of commerce and technology to fully support the fight against the outbreak, ensure supply of daily necessities for our communities and introduced practical relief measures for our merchants. No matter past, present or future, we remain true to our mission and we will support our merchants to overcome this challenging time together.’

Read also: Baidu shares soar 8% despite Q1 operating loss of 437 billion yuan

3. Alibaba unveils Covid-19 medical tools

However, on 19 March, Alibaba announced that its data intelligence unit Alibaba Cloud had partnered up with scientists and researchers from Alibaba DAMO Academy and the technical team at DingTalk to offer medical personnel globally access to a suite of advanced cloud-based technology applications in the fight against Covid-19.

The artificial intelligence (AI)-enhanced innovations, based on learnings and insights garnered during the initial outbreak of the virus, include:

  • DingTalk's International Medical Expert Communication Platform, hosted on Alibaba Cloud. It provides a means of free communication for medical workers all over the world to directly contact doctors from Covid-19 frontline medical institutions such as the First Affiliated Hospital of Zhejiang University
  • From Alibaba DAMO Academy, a global research initiative by Alibaba, three proven solutions are being made available via free trial for medical professionals and research institutes worldwide. They are:
  1. Epidemic Prediction Solution, which models epidemic characteristics of COVID-19 in a particular region, providing estimates of size, peak time and duration of the epidemic
  2. CT Image Analytics Solution – a CT image analytics technology service that can significantly improve testing accuracy and detection efficiency for diagnosing COVID-19 using deep-learning algorithms trained by data in China
  3. Genome Sequencing for Coronavirus Diagnostic Solution, an AI algorithm from Alibaba DAMO Academy and running on Alibaba Cloud, is a virus genome sequencing solution for coronavirus analytics that can diagnose the virus within 14 hours – five times faster than other sequencing solutions in China

Gain access to Alibaba, Tencent, Baidu, and other popular Chinese tech stocks through IG's world-leading trading platform. Depending on your outlook, you can buy long or sell short on these stocks by signing up for an IG account here.

4. First-time merchants using e-commerce tool Taobao Live surged 719%

In early February 2020 – at the peak of the Covid-19 outbreak in China, Taobao Live began to waive all service fees for new merchants to join its service. This allowed many merchants who had never used Taobao Live before to start livestreaming and launch new products on the platform at a click.

As a result, the number of merchants utilising Taobao Live for the first time surged 719% in February from January, the company revealed in a press release posted on 30 March 2020.

The company added that Taobao Live ‘provided a lifeline to many brands during the height of the Covid-19 pandemic in China’. It helped retailers to generate and maintain sales, while encouraging creative marketing and engagement with consumers.

Even as business has gradually remained to normal in China, livestream numbers have remained high, Alibaba further claimed.

Overall, gross merchandise volume generated by Taobao Live has grown by around 150% a year for three straight years, with continued strong growth expected in 2020.

Read also: Hang Seng Index rises as new rules allowed Alibaba, Xiaomi to be added

How to trade Alibaba stocks with IG

Are you bullish or bearish on Alibaba and other Chinese tech stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs in a few easy steps:

  • Create a live or demo IG Trading Account or log in to your existing account
  • Enter <company name> or <ticket code> in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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