Alibaba Earnings Could Be Hurt By Slow Chinese Spending

(CTN News) – Despite the Chinese economy hurting from pandemic restrictions until next year, Alibaba (BABA), China’s most valuable retailer, is likely to report a year-over-year increase in earnings per share, but slow revenue growth as the country emerges from the crisis.

Based on the analysts’ estimates compiled by Visible Alpha, Alibaba is expected to report net income of 13.1 billion yuan ($1.9 billion) for the first three months of the year, or roughly 0.54 yuan ($0.08) per share.

Compared to a loss of 0.75 yuan per share in the same quarter last year, that’s a significant improvement.

For this quarter, the company’s revenue is forecast to reach 209 billion yuan ($30 billion), a 2.5% increase over the same period last year, the third consecutive quarter of sluggish growth for a company that did not know double-digit sales growth before 2021.

Alibaba’s cloud computing revenue is expected to grow 1% to 19.2 billion yuan this quarter.1 Alibaba will issue its earnings report before the U.S. market opens on Thursday.2

It has been a concern for investors that China’s recovery would not be as strong as expected after its pandemic restrictions were lifted in January.

There was a 5.6% growth in industrial production in April compared with the same month a year ago, which was significantly lower than the 10.9% rise that analysts were expecting.

There was a 7.9% decline in imports in April compared with the previous month, while export growth dropped from 14.8% in March to 8.5% in April.34

A prominent problem facing the economy is the lack of aggregate demand for goods and services, according to Yu Yongding, a former director of a government think tank.

In 2022, the People’s Bank of China Alibaba reported that household bank deposits soared by a record 17.84 trillion yuan ($2.6 trillion) over 2021, an increase of 80% when compared to the previous year.

There is also evidence to suggest that savers still have not been able to tap into their pandemic stockpiles since consumer price inflation rose at the slowest pace in two years in April.67

Following the lifting of Covid restrictions earlier this year, Chinese stocks soared. A total of $20 billion has been invested by foreign investors in shares listed on the Shanghai and Shenzhen stock exchanges in the first month of 2023.

However, amid escalating tensions between the two largest economies in the world, that appetite has cooled. The amount of foreign investment in Chinese stocks has totaled just $6 billion between the months of February and April.8

Over the last year, Alibaba shares have remained almost unchanged, while Consumer Discretionary shares on the S&P 500 have increased 15.5%.

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