Alibaba's Q2 Earnings Coming Up: Should You Buy or Hold the Stock?

Core Viewpoint - Alibaba Group is set to report its second-quarter fiscal 2025 results on November 15, with expectations of revenue and earnings growth compared to the previous year [1][3]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for revenues is $33.47 billion, indicating an 8.63$2.26 per share, reflecting a 5.61% rise from the prior-year quarter [3]. - The earnings estimate has increased by 8.1% over the past 30 days [3]. Earnings Surprise History - Alibaba has a mixed earnings surprise history, with a 2.73% earnings surprise in the last reported quarter [4]. - The company has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 3.71% [4]. Factors Influencing Performance - The International Digital Commerce Group is expected to perform strongly, driven by momentum in platforms like AliExpress, Trendyol, and Alibaba.com [7]. - AI technology integration has enhanced user experience through features like multilingual search and personalized recommendations [8]. - B2B cross-border trade initiatives, including the Alibaba Guaranteed platform and Logistics Marketplace, are likely to positively impact international commerce metrics [9]. Domestic Market Dynamics - The China commerce retail business, supported by Taobao and Tmall Group, shows resilience through strategic investments [10]. - The "Star Cube Plan" partnership with Douyin aims to convert Douyin users into active customers, potentially boosting platform traffic [10][11]. Logistics and Cloud Segments - The Cainiao Smart Logistics Network benefits from strong domestic logistics services, while Alibaba Cloud maintains momentum in key sectors [12]. - However, aggressive pricing strategies in the cloud segment may impact revenues despite potential market share gains [12][13]. Price Performance and Valuation - Alibaba's shares have increased by 18.4% year-to-date, underperforming the industry and major indices [14]. - The stock is currently trading at a forward 12-month P/S ratio of 1.49X, which is below the industry average of 1.8X, indicating a discounted valuation [15]. Investment Thesis - Alibaba presents a compelling investment opportunity due to robust international commerce expansion, AI integration, and strengthened SME relationships [16]. - The domestic e-commerce business benefits from strategic partnerships, while the logistics segment shows promising growth [16]. - Despite macroeconomic challenges in China, the company's diversified revenue streams and strategic initiatives support a positive growth trajectory [16]. Conclusion - Investors may consider establishing positions in Alibaba ahead of its earnings report, given the growth catalysts across various segments [17]. - The integration of AI technology and strategic partnerships position the company favorably for sustained growth, making current price levels attractive for long-term investors [17].