China’s e-commerce giant Alibaba (BABA) is set to release first-quarter fiscal 2022 earnings on August 3.

Over the past six months, shares of the company have plunged 26%, and it is now trading at over $195.

Given the macroeconomic recovery and accelerated digitalization in China, it is worth taking a look at Alibaba’s fundamentals ahead of the results. A strong set of numbers in fiscal Q1 could help the stock regain investors’ confidence, so let’s take a closer look at what analysts on the Street are expecting.

Fiscal Q1 Projections

For Q1, the Street expects Alibaba to report adjusted EPS of $2.24 and revenues of $33.50 billion.

Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $2.16 per share. (See BABA Dividend Date and History on TipRanks)

Alibaba’s Prior Quarter Snapshot

In the last-reported fiscal fourth quarter, revenues came in at RMB187.4 billion, increasing 64% year-over-year and beating the consensus estimate of RMB179.9 billion. The company's growth was fueled by strong e-commerce revenues and the ongoing expansion of its cloud computing businesses.

Alibaba finished the year with 811 million active shoppers on its China retail marketplaces, marking an increase of 32 million from a year ago.

Despite the strong revenues beat, Alibaba reported an operating loss of RMB7.7 billion. A major contributor to the loss was the RMB18.2 billion antitrust fine that Chinese regulators slapped on the company in April. Without the fine, it would have reported an operating profit of RMB10.6 billion.

What to Watch Out for in Alibaba Earnings

Over the past few years, Alibaba has garnered both name and fame in the e-commerce space, and for good reason. As the economy recovers from the COVID-19 outage, investors will be monitoring to see whether this China’s powerhouse can maintain its e-commerce growth as physical stores re-open.

Alibaba mainly generates revenues from its four reportable segments — Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives, and Others.

Let us see how these segments are expected to have contributed to Alibaba’s top-line growth in the upcoming quarter.

First and foremost, when it comes to Alibaba’s commerce business, there is no doubt that its e-commerce platforms have shown remarkable growth in recent quarters. It continues to be a bright spot, with the pandemic accelerating the shift to online shopping.

In the last-reported fiscal fourth quarter, the segment’s revenues totaled RMB 161.4 billion ($24.6 billion), reflecting an increase of 72% on a year-over-year basis. The trend is expected to have continued in the to-be-reported quarter, driven by Alibaba’s continuous efforts.

In this regard, Alibaba’s digital consumption marketplace in China, the Taobao app, has continued to strengthen its comprehensive supply of branded products, adding new customers to its platform. In the retail space, Alibaba’s Sun Art is expected to have continued to perform well, driving revenues for the company. In addition, the company’s Freshippo supermarket, which is the community marketplace business, and new features on the core platform such as Taobao Live and short-form video, are all revenue generators for Alibaba.

Apart from that, Alibaba's cloud computing business has remained remarkably strong. The post-pandemic climate, without a doubt, presents a significant opportunity for industrial digitization, allowing enterprises to operate digitally. Alibaba Cloud is primed to prosper as China's industrial sector faces a digital revolution as well.

Alibaba Cloud generated revenues of RMB 16.8 billion in the prior quarter, up 37% from the year-ago figure. The cloud business is expected to have continued to perform well in the upcoming quarter, driven by continued investments made in the Asia Pacific region.

In June, the company announced its plans to invest $1 billion across the Asia Pacific region over the next three years. Furthermore, Alibaba Cloud officially launched its third data center in Indonesia. It plans to launch its first data center in the Philippines by the end of 2021 and set up an innovation center in Malaysia.

Coming next to Alibaba’s Cainiao logistics services, Cainiao has contributed well to the company’s top-line growth. The increased need for fulfillment services, as well as for cross-border supply chain services for import and export merchants, are projected to drive Cainiao's further expansion.

Investors should also pay attention to Alibaba's key metrics, such as mobile monthly active users (MAU) and annual active consumers on China's retail marketplaces.

To note, MAU came in at 925 million in the last reported quarter, up 9.4% from the prior-year quarter. Additionally, annual active consumers in the same marketplace were 811 million in total, reflecting 11.7% year-over-year growth. The figures clearly indicated that Alibaba’s growth fundamentals remain intact.

Another key takeaway from Alibaba’s last quarter’s press release was the growth plans the company intends to undertake this year. Alibaba said, “We plan to use all of our incremental profits and additional capital in the fiscal year 2022 to support our merchants and invest into new businesses and key strategic areas that will help us increase consumer wallet share and penetrate into new addressable markets.”

Though these expansion activities are critical for Alibaba's long-term success, investors should be aware that they may increase the company's expenses and, as a result, have a short-term impact on earnings. Furthermore, Alibaba's legal issues could hurt the company's revenues in the coming quarters.

Analysts’ Opinions on Alibaba

Ahead of the fiscal Q1 earnings release, Bank of America Securities analyst Eddie Leung reiterated a Buy rating on the stock with a $285 price target (46% upside potential).

For the upcoming quarter, Leung expects Alibaba to report total revenues of RMB211 billion, up 37% year-over-year. Further, the analyst expects “Cloud and Cainiao” initiatives to “improve margins” of the company.

Another analyst, Colin Sebastian of Robert W. Baird, reiterated a Buy rating on the stock with a $270 price target, implying 38.3% upside potential to current levels.

Sebastian expects Alibaba’s revenue growth to accelerate sequentially in Q1, driven by strength in “Alibaba's e-commerce platforms.” However, he believes that the “decelerating growth in the company's New Retail initiatives” could impact revenue to some extent in the quarter.

Nevertheless, the five-star analyst remains optimistic about the company’s fundamentals in the long term.

Consensus among analysts is a Strong Buy based on 22 Buys, 2 Holds, and 1 Sell. The average BABA price target of $284.87 implies 45.9% upside potential from the current levels.

TipRanks data shows that financial blogger opinions are 92% Bullish on BABA, compared to a sector average of 72%.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.