Alibaba Group Holding Limited (NYSE: BABA) is slated to report its second-quarter 2020 earnings results on Friday before the market opens. The results will be benefited by cloud business, core commerce segment, new retail, food delivery, user growth, and lower-tier penetration.
The company will be benefited from the spike in mobile transactions as more customers are taking the smartphone route to access the Alibaba platform. The bottom line will be driven by solid sales, combined with improved monetization rates. The rapid adoption of cloud service is likely to increase in the cloud segment results.
Alibaba continues to increase its spending and investments in the business, strategic acquisitions, and certain initiatives. The company believes the investments and initiatives are crucial to its future growth, but they will have the effect of increasing its costs and lowering margins and profit, and this effect may be significant in the short term and potentially over longer periods.
In recent years, the company has experienced significant growth in revenue and in its business. This is likely to depend on the growth of its core businesses. The top-line growth is likely to be hurt by decreasing consumer spending, rising competition, and slowing growth of China’s retail industry as well as changes in the political and economic conditions.
Analysts expect the company’s earnings to jump by 7.10% to $1.50 per share and revenue will soar by 33% to $16.47 billion for the second quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “buy” rating with an average price target of $222.81 per share.
For the first quarter, Alibaba posted a 145% jump in earnings helped by higher revenues and lower costs and expenses. The company continued to expand its customer base, increase operating efficiency, sustain user engagement and consumer spending across its platforms. The company continues to invest in long-term growth while at the same time gaining cost efficiencies in its investment areas.
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