Alibaba (BABA) is scheduled to report results of its fourth fiscal quarter of FY19 before the market open on Wednesday, May 15, with a conference call scheduled for 7:30 am ET. What to watch for:
1. CHINA TRADE FIGHT IMPACT: On the company's last earnings call, Alibaba executives said that concerns about trade tensions might affect sentiment, but Alibaba's exposure to the tangible effects of trade tariffs was "small." Alibaba's CFO said with the company's Q3 report that there was no update to the company's fiscal year revenue guidance after the company had lowered its FY19 revenue view by 4%-6% with its Q2 report, citing "fluid macro-economic conditions." The tariff impact comments and guidance cut came, however, prior to the latest exacerbation in the fight between the U.S. and China, which has recently included both sides increasing their tariffs and threatening additional actions.
2. PRICE TARGETS RISING: Since the company's last quarterly report, a number of Wall Street research firms have increased their price targets on the shares. On April 15, Barclays analyst Gregory Zhao raised his price target for Alibaba to $220 from $200, stating that China's macro environment is recovering from the trough in Q4 and will stabilize, "thanks to the incentive measures and tax cut by government." On May 7, KeyBanc analyst Hans Chung raised his price target for Alibaba to $240 from $210, saying he still sees meaningful upside as he believes the company will continue to be a dominant leader and pioneer in e-com 3.0. In the near to mid-term, the analyst expects feed monetization to start in the near future and contribute a meaningful growth. On May 13, TH Data Capital analyst Tian Hou raised his price target for Alibaba shares to $220 from $180, telling investors that he believes Alibaba's Q4 revenue growth is likely to be better than consensus given its continuing innovations in the marketplace. "Non-stop adoption of innovations in the marketplace keeps the existing business energetic," stated the analyst.
3. ALTABA LIQUIDATION: On April 2, Altaba (AABA) announced that the fund's board of directors had approved the complete liquidation and dissolution of the fund, subject to stockholder approval. Altaba said the fund "has pursued a number of strategies with the goal of achieving its investment objective, including by repurchasing the shares, both in the open market and through an exchange offer of American Depository Shares of Alibaba Group Holding Limited and cash for shares, the simplification of the fund through the disposition of assets other than its position in Alibaba and the resolution of certain actual and contingent liabilities, and through other means. After carefully considering the risks, timing, viability and potential impact on the fund's stockholders of additional strategies potentially available to the fund to achieve its investment objective, as well as the recommendation of management, and in consultation with the fund's advisors, the board unanimously determined that the liquidation and dissolution pursuant to the plan is advisable and in the best interests of the fund and its stockholders." Altaba's liquidation plan, with includes exiting its 11% stake in Alibaba Group, may weigh on near-term sentiment for Alibaba's share price, Jefferies analyst Karen Chan said at the time. Chan, however, added that she continues to like Alibaba's "resilience and expansion into the Chinese online consumption pocket with high-margin feed monetization lever remaining in place." She believes the company's fundamentals remain intact and kept a Buy rating on the stock.