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Alibaba Group Holding Limited (NYSE:BABA): Poised For Long Term Success?

Jason Fuller

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After Alibaba Group Holding Limited’s (NYSE:BABA) earnings announcement on 31 December 2018, analyst consensus outlook appear cautiously subdued, with profits predicted to rise by 12% next year compared with the higher past 5-year average growth rate of 17%. With trailing-twelve-month net income at current levels of CN¥64b, we should see this rise to CN¥72b in 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Alibaba Group Holding

How is Alibaba Group Holding going to perform in the near future?

Longer term expectations from the 50 analysts covering BABA’s stock is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for BABA, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NYSE:BABA Future Profit February 9th 19

From the current net income level of CN¥64b and the final forecast of CN¥108b by 2022, the annual rate of growth for BABA’s earnings is 20%. This leads to an EPS of CN¥44.13 in the final year of projections relative to the current EPS of CN¥25.06. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 26% to 19% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Alibaba Group Holding, I’ve compiled three important aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Alibaba Group Holding worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Alibaba Group Holding is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Alibaba Group Holding? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.