Q3 2014
Pre-Market www.benzinga.com/stock/BABA/earnings
see Anlysten :www.benzinga.com/calendar/ratings
....RS Investment’s head, Tony Chu, claimed that along with investors who will be looking at tomorrow’s results very closely, his firm expects to see strong first-quarter results as well as upbeat guidance from Alibaba. He added that the e-commerce company should disclose more information and be more transparent to its investors.
Other firms were equally optimistic about Alibaba’s results and future prospects. Cynthia Meng of Jefferies, a firm which recently initiated coverage on the e-commerce company, said that in ten years over 50% of the country will be using Alibaba’s online shopping platform.
Jefferies has set a 12-month price target of $118 for Alibaba, which reflects an upside of around 20% to Friday’s close of $98.60. Ms. Meng added that the company has other avenues to explore, with many of the country’s rural markets still untapped.
In addition to that, work on infrastructure, and mobile phone penetration in China, will also enable more widespread access to Alibaba’s platform in the near future. Jefferies expect Alibaba’s annual revenue to grow by around 36% over the next three years.
It will be interesting to assess how each of the company’s segments did for the September quarter. Taobao and Tmall are expected to be at the forefront of the total revenues.
Taobao makes money by hosting a large number of merchants and charging them in exchange for services like advertising. On the other hand, Tmall generates revenue by hosting some of the world’s top brands and taking a small percentage from them out of the total transaction amount.
However, analysts are more inclined toward Tmall in terms of revenue generation. Their rationale is that the high-end brands on Tmall will be the key driver for the company’s earnings in the years to come.
Another area of interest for investors will be Alibaba’s profit margins for the company. Although Alibaba’s profit margin is higher than that of other players in the industry, it has contracted over the last year due to the company’s increasing expenditure on smartphone and tablet services.
Another factor which holds implications for the company’s margins is the increasing customer shift from PCs to smartphones and tablets. The company claims that merchants get to pay less in terms of advertising fees when customers use tablets instead of PCs. The company’s operating margin contracted to 43.4% in the quarter ended June this year, compared to 50.3% in the same quarter last year....
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