BABA(BABA) ZACKS·2025-02-17 15:55Core Viewpoint - Alibaba Group is set to report its third-quarter fiscal 2025 results on February 20, with expectations of revenue growth and earnings increase compared to the previous year [1][19]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for revenues is 3.08 per share, reflecting a 15.36% increase from the prior-year quarter [1][3]. Earnings Surprise History - Alibaba has a mixed earnings surprise history, with a negative surprise of 4.87% in the last quarter and an average surprise of 2.14% over the last four quarters [4]. Earnings Prediction Model - The current Earnings ESP is 0.00%, and the Zacks Rank is 3 (Hold), suggesting that the model does not predict an earnings beat for this quarter [5][6]. Operational Dynamics - The company faces mixed operational dynamics, with promising international expansion but persistent challenges in the domestic market [7][19]. International Performance - The International Digital Commerce Group reported a 29% year-over-year revenue growth, driven by strong performance in AliExpress and Trendyol [8]. - Strategic investments in European and Gulf markets and the launch of the AliExpressDirect model are expected to support continued growth in this segment [8]. Domestic Market Challenges - The domestic e-commerce landscape remains challenging, with Taobao and Tmall Group showing only 1% revenue growth in the second quarter despite new initiatives [9]. - Macroeconomic headwinds in China may continue to pressure consumer spending [9]. Cloud Intelligence Group - The Cloud Intelligence Group showed a 7% revenue increase, with triple-digit growth in AI-related products for five consecutive quarters [10]. - However, aggressive pricing strategies may impact near-term profitability [10][11]. Financial Position - Alibaba maintains a strong balance sheet with RMB352.1 billion in net cash, but a 70% year-over-year decrease in free cash flow raises concerns about capital allocation [12]. Stock Performance and Valuation - Alibaba shares have gained 68.8% over the past year, outperforming the industry and major indices [13]. - The stock is currently trading at a forward P/E of 12.39X, which is a discount compared to the industry average of 24.8X [16]. Investment Thesis - The investment case for Alibaba is mixed, with strong international growth but challenges in the domestic market and cloud competition [19]. - Investors may consider waiting for clearer signs of sustainable growth before increasing exposure to the stock [19][20].