Alibaba to Report Earnings as Traders Focus on Trump Trade
Alibaba to Report Earnings as Traders Focus on Trump Trade
Will BABA's AI initiatives offset China market pressure?
- Alibaba Group Holding (BABA) is set to report earnings on Friday.
- Its stock is on track for a second month of losses ahead of earnings, as Trump trades rattle Chinese markets.
- Analysts expect earnings per share of $2.11 on $34.13 billion in revenue.
Alibaba Group Holding (BABA) is scheduled to report second-quarter fiscal earnings on Friday before the market open.
Chinese stocks listed in the United States, as well as China-listed stocks, sold off the last several weeks as traders priced in a more aggressive U.S. administration following Donald Trump’s election victory. That contrasted to a strong performance across U.S. equity markets.
As of Nov. 12, BABA stock was tracking for a nearly 7% loss, which compares to a nearly 5% gain in the S&P 500 (/ES). The divergence in performance between U.S. and Chinese-listed equities stems from expectations that the Trump administration will restart the trade war with China. He could do that by extending and perhaps strengthening tariffs and imposing other trade measures witnessed during his first term.
Outside of trade war concerns, BABA has made some progress in positioning itself for long-term growth. The company was added to the Stock Connect program in September—connecting the Hong Kong Stock Exchange with the Shenzhen and Shanghai stock exchanges—allowing access to mainland Chinese investors.
Alibaba also recently launched an artificial intelligence (AI) search engine for small business customers in the Americas and Europe, a move designed to help businesses source products. The AI engine, called Accio, uses Alibaba’s Tongyi Qianwen large language model (LLM). The move is part of a larger effort to broaden its AI reach and integrate it across the business.
What do analysts expect from BABA?
Analysts anticipate that earnings per share (EPS) will cross the wires at $2.11 on $34.13 billion in revenue for the second fiscal quarter. That would compare to earnings of $2.14 on $30.78 billion in revenue a year ago.
Last quarter, Alibaba posted earnings of $2.26 on $33.5 billion in revenue. BABA has missed EPS estimates in two of the last five reports, while it has beaten revenue estimates in four of the last five reporting period.
Trading Alibaba earnings
Alibaba, as of today (Nov. 12), traded with an implied volatility rank (IVR) of 45.3, meaning that volatility is slightly subdued compared to the past 12 months of trading. The options market is pricing a +/- 5.2 point move, or about 5.7% of today’s 91.61 stock price.
Technically, there is a possible area of support at 90.46, which represents the May swing high. The stock is about 22% off its October high of 117.82. A move below the May swing level could introduce further weakness. Alternatively, if BABA holds support, it could offer a base for traders to get back on the long side.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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