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Despite a disappointing Q2 2024 earnings report, Alibaba’s stock rebounded on AI and cloud computing hopes, gaining 2.5% in five days.
Alibaba: Earnings Breakdown
Alibaba announced its earnings for the quarter ending June 30, 2024. The company reported revenue of 243 billion Chinese yuan ($34.47 billion), an increase of 4% year over year. However, it fell short of the expected 249 billion yuan ($34.83 billion).
Net income also disappointed, standing at 24.27 billion yuan ($3.34 million) compared to LSEG’s expectation of 26.91 billion yuan ($3.76 million). It plunged by 29% due to a 15% decline in income from operations.
Diluted earnings per share came in at $0.17, while Non-GAAP diluted earnings per share were $0.28—a 5% decrease year-over-year.
Net cash from operating activities dropped by 26% to $4.6 million, and free cash flow declined by 56% to $2.39 million in the same quarter in 2023.
Following the earnings report, Alibaba’s shares dropped by 4% in the pre-market session as the company’s financial results fell short of market expectations. However, during the Asian trading hours on August 16, the stock has recovered. BABA price has gained 2.5% in five days.
The slowdown in consumer spending and intense competition, particularly from rivals like JD.com and PDD, has negatively impacted the company’s market share.
PDD’s strategy of promoting unbranded and cheap products has made it the most popular e-commerce platform in China, further putting pressure on Alibaba’s performance.
Experts’ Thought on Alibaba
Analysts are cautiously optimistic about Alibaba’s future despite the recent setbacks. The overall Chinese e-commerce market is experiencing a slowdown. According to S&P Global, its annual growth expected to decrease from 13% over the past five years to 8%-9% by 2026.
Alibaba’s strategy of marketing unbranded products has been met with skepticism, as it could potentially damage long-term relationships with branded merchants and cannibalize profits from established merchandise.
However, the company’s focus on strategic initiatives, such as price-competitive products and AI-driven marketing tools like Quanzhantui, is a positive step towards enhancing customer retention and purchase frequency.
Alibaba: Future Outlook
Despite the challenges, analysts predict continued growth for Alibaba, particularly due to its investments in cloud computing and AI-based projects. The Cloud Intelligence Group, which posted a 6% revenue increase this quarter, has positioned Alibaba as a leader in AI training and cloud services, being the only Asian cloud service provider among global leaders.
Analysts from Wall Street and Trading View estimate Alibaba’s stock as a ‘strong buy’ over the next 12 months, expecting a 4.9% increase in share price by the end of the year to $83.08.
Other predictions suggest an average share price of $107.56 within the next year, representing a potential 35% increase from the current price. Zacks Research offers similar predictions, with estimates ranging from $80 to $135 per share.
Nadir Khalid, an international stock market expert, believes that despite current challenges, Alibaba’s structural changes and focus on AI and cloud computing will lead to significant long-term gains. He anticipates that these innovations, coupled with efforts to minimize operational costs, will result in higher net incomes and attractive revenues for the company in the coming years.
