After Alibaba Group Holding Limited’s (NYSE:BABA) earnings announcement in March 2018, analyst consensus outlook appear cautiously subdued, as a 19.92% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 24.12%. With net income at current levels of CN¥63.99B, we should see this rise to CN¥76.73B in 2019. Below is a brief commentary around Alibaba Group Holding’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here. Check out our latest analysis for Alibaba Group Holding
How will Alibaba Group Holding perform in the near future?
The view from 47 analysts over the next three years 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.
From the current net income level of CN¥63.99B and the final forecast of CN¥147.94B by 2021, the annual rate of growth for BABA’s earnings is 22.20%. EPS reaches CN¥55.18 in the final year of forecast compared to the current CN¥25.06 EPS today. The main reason for growth is a result of revenue expansion of 24.08% exceeeding cost growth over time. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 25.57% to 21.08% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Alibaba Group Holding, there are three fundamental factors you should further research:
- 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.
- 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.
- 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 pass 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.