What Investors Should Be Looking For In Alibaba's Earnings Report On Thursday?

Alibaba Group Holding Ltd BABA is all set to declare its latest quarterly earnings on Thursday before the opening bell.

RJ Hottovy, strategist at Morningstar, was on CNBC Wednesday to discuss the growth expectations from the company and what investors should be looking for in the earnings report tomorrow.

Growth Expectations

“I think that our expectation for growth is still pretty healthy for this company,” Hottovy said. “Not only is that the Chinese e-commerce still at pretty early stages of growth, but they have just started to tap some of the tier-3 and below cities in China.”

“I think there’s a lot of demand for branded products in those regions and without the established retail framework that a lot of the developed countries have. I think, e-commerce is going to fill that void, still pretty optimistic about the longer-term growth expectations of this company.”

He continued, “We forecast the average annual growth rate of around 30 percent for the next 5 years. Obviously, little bit higher in the next couple of years and a little bit lower in the later years, but still generally lots of white space for this company to grow particularly in China.”

Investors’ Expectations

On what investors should be looking for in Alibaba’s earnings report tomorrow, Hottovy  said, “I think the first thing people are looking for is the monetization rates, so, effectively the revenue that they are taking in from the gross merchandise volume that they are selling.”

“The other thing that I think the market is looking at here would certainly be any indications of deceleration in the Chinese GDP. If that has any impact on the overall e-commerce market.”

“And then the last thing is that there was an internal memo from Jack Ma that made its way to the market last week talking about a hiring freeze within Alibaba and expenses are growing or growing too fast and I think the market needs clarity on that,” Hottovy concluded.