To The Moon

$Alibaba(BABA)$ is scheduled to report its fiscal second-quarter 2025 earnings on 15 Nov 2024 before market open.

BABA is expected to report net profit of 26.49 billion yuan, equivalent to $3.66 billion, for the three months ended September, that would be lower compare with net profit of 27.71 billion yuan a year earlier and 24.27 billion yuan in the June quarter.

Second-quarter revenue was likely 238.49 billion yuan up from 224.79 billion yuan a year ago but lower than 243.24 billion yuan in its first quarter.

Earnings per share forecast is expected to come in at $2.05. The likely reason why revenue might be up but profit drop is because BABA account for heavy spending to improve the user experience on its Taobao and Tmall platforms.

Effect Of Macroeconomic Outlook and Sentiment On Domestic E-Commerce

BABA have been facing macroeconomic outlook and consumer sentiment amid China's latest stimulus measures. While the measures seems to focus more on helping the consumers to navigate the real estate sectors, we are seeing BABA reporting that their sales hit record during the 11.11 promotion.

BABA said it saw a record number of active buyers this year. The retailer said that 589 brands including Apple, Nike and Haier surpassed 100 million yuan in gross merchandise volume, a measure of a platform's sales volume. It did not, however, reveal the total amount of sales over the period.

The numbers seemingly failed to quiet concerns that China's efforts to revive its lagging economy aren't enough. Chinese authorities have introduced a raft of stimulus and economic measures to try to kick-start its lagging economy but cautious consumers have yet to show signs of increased spending.

Swift Growth From International Ecommerce Unit Might Save The Day

Alibaba's international commerce unit is expected to continue its swift growth, with revenue likely rising 28% to 3.13 billion yuan for the period,

The business segment also likely improved its adjusted Ebita loss to 3.3 billion yuan, it said, narrowing from 3.71 billion yuan in the June quarter.

Alibaba Group’s international e-commerce arm posted 32% revenue growth in its previous quarter, driven by strong performance for its cross-border businesses The company’s diverse mix of cross-border and local e-commerce offerings presents big potential for more market expansion.

Record GMV and Active Buyers During 11.11 Festival

Alibaba.com, the B2B marketplace operated by Alibaba Group Holding Limited (NYSE: BABA), expects to grow its gross merchandise volume (GMV) by 20% in 2024, reaching $60 billion. This would be an increase from $50 billion in 2023.

Taobao and Tmall, the retail arms of China’s Alibaba Group, have reported robust growth in gross merchandise volume (GMV) and a record number of active buyers during the 16th edition of their annual 11.11 Shopping Festival.

The event, also known as ‘Double 11’, saw significant growth and notable achievements across various metrics, driven by continued expansion in key product categories and strong consumer engagement, especially from 88VIP members.

As of June 2024, China’s paid e-commerce membership programme 88VIP has more than 42 million members. A total of 589 brands surpassed 100m yuan ($13.88) in GMV, up from 402 brands in the previous year.

In addition, 45 brands, including major names such as Apple, Haier, Midea, Xiaomi, NIKE and Wuliangye, exceeded 1bn yuan in GMV.  The number of orders placed by 88VIP members grew by more than 50% year-on-year as of midnight on 11 November.

What we would be expecting for third quarter, we might see similar or slight reduction on these numbers because in China, consumer confidence decreased from July to September 2024, with the index dropping from 85.8 points in July to 85.7 points in September. The consumer confidence index (CCI) is a key indicator of economic optimism among consumers, and is used by investors, manufacturers, and retailers to make decisions.

Alibaba (BABA) Price Target Forecast

Based on 18 Wall Street analysts offering 12 month price targets for Alibaba in the last 3 months. The average price target is $124.40 with a high forecast of $145.00 and a low forecast of $85.00. The average price target represents a 35.22% change from the last price of $92.00.

While we have seen BABA declining below $100, and we are seeing some efforts for it to move back to its previous highs, investors confidence on its domestic ecommerce remains a concern.

Technical Analysis - MACD and Multi-timeframe (MTF)

BABA has not been able to cross $100 since its decline from early October, and currently it is trading below both short-term and long-term MA, and if we looked at the MACD, it is forming a bearish downside.

This might explain why MTF is giving a neutral signal because the concerns over China consumer sentiment as they are cautious about their spending, what we can expect coming positive might be from BABA international ecommerce via Lazada, but do remember the expenses BABA are spending in improving the user experience on its Taobao and Tmall platforms.

I would be monitoring the price action today (14 Nov) on BABA trading before seeing if there is an opportunity to enter.

Summary

BABA might still be faced with low shopping demand from its domestic market, and considering that there are many other players serving the China domestic market. One thing we can look forward to is BABA international ecommerce, Lazada, but do understand that they are also facing competition from player like $Sea Ltd(SE)$ Shoppee in South-east Asian.

So it is important for us to look at its operating expenses and whether these warrant spending to acquire more customers and sellers to boost its platform.

Appreciate if you could share your thoughts in the comment section whether you think BABA could gain from swift growth in its international ecommerce.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.