A display shows Alibaba Group signage on the floor of the New York Stock Exchange (NYSE) in New York, USA, Monday, January 7, 2019.
Michael Nagle | Bloomberg | Getty Images
Alibaba is expected to slow revenue growth after years of success when reporting first-quarter revenue on Thursday. However, profitability is likely to improve.
This is what the market expects for Alibaba's June quarter:
- Revenue of 1[ads1]11.73 billion yuan ($ 15.93 billion), according to Refinitive data. If realized, this would be a 38% year-over-year increase, but slower than the more than 61% growth seen in the same quarter last year.
- Non-GAAP diluted earnings per share (EPS) of 10.25 yuan, according to estimates by Refinitive.
Alibaba's core business, which includes the Tmall and Taobao shopping platforms, is expected to be the largest growth driver given that it is the company's largest division.
The Chinese giant has expanded its core business internationally through the majority-owned Singapore-based e-commerce platform Lazada, and domestically by pushing its products into smaller cities.
"We expect a solid June quarter for BABA, with e-commerce possibly beating revenue expectations thanks to Tmall's strong GMV growth (gross sales value)," said Xiaoyan Wang, an analyst at 86Research for CNBC. "We also expect continuous user growth even on such a large base, as Taobao and Tmall are successfully penetrating into low-lying cities."
Part of Alibaba's core business is the so-called new retail strategy that seems to merge the various parts of the business from payment to brick and mortar stores and food delivery into one large ecosystem. Part of the pressure here has been investments in logistics, Hema supermarkets and food delivery business Ele.me.
Investors will look at the results of these new areas – especially food delivery, which faces stiff competition from Chinese rival Meituan.
According to analysts, one of the most promising areas of Alibaba's business is cloud computing. The division saw 76% sales growth from the previous year in the March quarter and has slowly grown its share of Alibaba's revenue. Although it is still only around 8% of revenue, analysts see a huge opportunity for the technology giant.
"Cloud is still the most important asset we believe Street is focused on. Given the penetration of cloud in China, BABA has a great opportunity for green fields in the coming years on this front," Daniel Ives, CEO of Equity Research at Wedbush Securities , told CNBC.
Alibaba is the largest cloud computing operator in China by market share.
Alibaba's investment in new areas has come at a price – falling margins. However, the company has signaled that it will continue to invest, which so far has not led to ghosts for the market. Investors want to see the margin installations carefully.
Another concern is the effect of the US-China trade war.
"China's e-commerce players have come under great pressure in light of concerns about regional growth and macroeconomics. We think … the bark is worse than bite at this time, although this is still a big one (" prove me " ) quarter for BABA, "Ives said.
Alibaba's shares are up nearly 20% this year, but Wall Street believes they could go higher next year. The average price target for the stock is $ 218.09, according to Reuters data. This represents an upside of 34.5% from Wednesday's close.
The Chinese e-commerce giant is also reportedly looking for an initial public offering in Hong Kong, which could raise as much as $ 20 billion dollars. On Thursday, however, the New York Post reported that Alibaba was weighing whether to postpone the listing, which is scheduled for September, amid protests against China in Hong Kong. Alibaba declined to comment when CNBC was contacted about the matter.
Despite some of the long-term headwinds, Alibaba's various investments should facilitate growth over the next few years, according to Jefferies equity analyst Thomas Chong.  "Alibaba has several growth drivers in the years to come, in our view, with the core market a strong cash cow enjoying secular momentum in the midst of China's ongoing consumer upgrade, thanks to solid execution and technological ability to digitize retail, thus increasing efficiency," Chong wrote in a recent note.
"The highly synergistic ecosystem makes it easy to run into lower-tier cities and local services. It has clear market leadership in cloud computing, which is the backbone of digitization in various industries."
<! – – ->