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China’s Alibaba Group Holding Ltd (NYSE:BABA) is expected to post a 1.7% rise in revenue when it reports its first quarter results on Thursday before markets open.
Wall Street expects Alibaba to post earnings per share (EPS) of $2.01, while revenue is expected to be $31.21 billion.
China’s slow economic recovery following its uncompromising “zero-COVID” policy and its severe lockdown has lowered consumer confidence, disrupted supply chain and production, keeping companies including Alibaba under pressure.
Adding to that, Beijing’s clamp down on its tech sector over the past two year continues to weigh on the business for some of its biggest companies.
Alibaba is also facing lower demand and increased competition from established ecommerce rivals including Pinduoduo (PDD) and JD.com (JD) as well as newer ones. Its revenue for the previous quarter grew just 2%.
During its fourth-quarter earnings call, CEO Daniel Zhang said that the company is noticing a gradual recovery, but “consumer confidence and spending power still need further momentum.”
However, analysts believe that the recent opening up of the economy and lower regulatory hurdles could give Alibaba a boost this quarter.
“Despite recording negative topline growth, Alibaba’s free cash flow has rebounded nicely in recent quarters, and its long-term business outlook remains robust,” said Seeking Alpha analyst Ahan Vashi.
Vashi added that the recent development regarding artificial intelligence and a demand for its cloud segment should be beneficial for Alibaba.
Moreover, the company’s plan to spin off its cloud business and making it an independent public listed company could be a good way to mitigate regulatory scrutiny and improve earnings.
Alibaba’s stock grew also nearly 3% so far this year, showing some resurgence in interest from investors.
Over the last two years, Alibaba has beaten EPS estimates 88% of the time and has beaten revenue estimates 50% of the time.
Analysts are bullish on the stock with Seeking Alpha analysts, Wall Street and Seeking Alpha’s Quant Ratings considering the stock a “strong buy”, mainly uplifted by profitability.
Over the last three months, EPS estimates have seen five upward revisions, compared to six downward revisions, while revenue estimates have seen three upward revisions versus seven downward moves.