After Alibaba Group Holding Limited’s recent earnings announcement in March 2019, analyst forecasts appear to be pessimistic, with earnings expected to decline by 7.0% in the upcoming year compared with the past 5-year average growth rate of 17%. Presently, with latest-twelve-month earnings at CN¥88b, we should see this fall to CN¥81b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How will Alibaba Group Holding perform in the near future?
Longer term expectations from the 47 analysts covering BABA’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of CN¥88b and the final forecast of CN¥154b by 2022, the annual rate of growth for BABA’s earnings is 16%. This leads to an EPS of CN¥52.33 in the final year of projections relative to the current EPS of CN¥33.95. As revenues are expected to outpace earnings, analysts expect margins to contract from the current 23% to 19% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Alibaba Group Holding, I’ve put together three important aspects you should further examine:
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!
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