BABA: Recent Earnings Misses

In the past three quarters, $Alibaba(BABA.US)$ has fallen short of its consensus earnings estimates. Its second quarter for fiscal 2022 missed estimates on both lines. Its earnings per share (EPS) of $1.74 came in 19 cents lower than analyst estimates. This is despite a healthy 29% jump in total revenues during the quarter.

Nevertheless, during the second quarter, its core Chinese eCommerce business revenues surged by 30% from the prior-year period. Moreover, international and cloud revenues grew by 34% and 33%, respectively, on a year-over-year basis. Consequently, there is robust growth in Alibaba’s businesses at this time. Additionally, increased lockdowns are likely to drive more online traffic.

However, in the upcoming quarters, Alibaba will have to deal with higher tax rates. It is no longer a key software enterprise (KSE), with a massive jump from 10% to 20%. The consensus estimate for the third quarter is $2.48 in adjusted EPS, which is 3.8% lower than the same quarter last year.

Chinese November retail sales were unimpressive and with the increased investments in its subsidiaries, things are looking tough for Alibaba in the upcoming quarter. However, by March, things are likely to change for the company. Due to easy comps, Alibaba will probably beat analyst estimates and reverse course.