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A Net Margin Analysis of Alibaba

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Aug. 28 2018, Updated 1:01 p.m. ET

How have Alibaba’s EPS and net margin changed over the years?

Alibaba Group Holding (BABA) noted other income worth 1.9 billion Chinese yuan in fiscal 2014 compared to 31.1 billion yuan ($5 billion) in fiscal 2018. The increase in its other income in fiscal 2018 was due to a noncash gain from Cainiao Network.

Alibaba’s net income grew at a 31% CAGR (compound annual growth rate) between fiscals 2014 and 2018. Its net margin contracted from 54% in fiscal 2014 to 33% in fiscal 2018. Its net income increased 44% to 83.2 billion yuan ($13.3 billion) in fiscal 2018. Its EPS rose at a 28% CAGR between fiscals 2014 and 2018. In fiscal 2018 alone, its EPS rose 40% to 32.9 yuan ($5.2).
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EPS and net margin in the fiscal first quarter of 2019

The company’s other gains improved by 133% to 6 billion yuan ($899 million) in the fiscal first quarter of 2019. Its net income remained almost the same at 20.1 billion yuan ($3 billion). Its net margin contracted to 25% in the quarter compared to its level of 40% in the fiscal first quarter of 2018. Its EPS rose 1% to 8 yuan ($1.2) in the quarter.

Alibaba’s quarterly EPS were unable to match the consensus estimate for the fiscal first quarter of 2019, missing it by a margin of 1.4%. JD.com (JD) missed its consensus EPS estimate for the quarter by 50.9%. However, Amazon (AMZN) beat its EPS estimate by 99.8%, and eBay (EBAY) and Walmart (WMT) beat their estimates by 3.6% and 6%, respectively.

Alibaba’s EPS projections

Analysts expect EPS of 8.3 yuan for Alibaba in the fiscal second quarter of 2019, which ends on September 30. Its EPS are expected to be 4% lower than the EPS it recorded in the fiscal second quarter of 2018. Its expected EPS for the fiscal years ending in March 2019, 2021, and 2021 are 39.3 yuan, 52.5 yuan, and 67.7 yuan, respectively.

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