For Chinese e-commerce giant Alibaba (BABA), 2015 has been anything but a magic carpet ride.
Alibaba stock is down some 22% year-to-date. That performance is the mirror image of stocks in the benchmark iShares China 25 Index (FXI), which is up 25% over the same period.
BABA has been plagued by a host of follies, including a couple of rather embarrassing incidents just in the past week.
First, we found out that Alibaba CEO Jack Ma thinks he made a mistake in growing the company too aggressively. In a speech to employees, Ma announced that there would be a hiring a freeze in some of the companies that Alibaba controls.
As reported by Bloomberg, Ma said that the current level of 30,000 workers should be enough to maintain operations.
My colleague James Brumley put the issue in perspective:
“It wasn’t an admission that the company is overstaffed or struggling to pay all of its employees and still turn a profit. On the other hand, the fact that Jack Ma made a point of saying this would tacitly suggest to BABA shareholders that the company’s revenue is abnormally low compared to its personnel expenses.”
The question of abnormally low revenue compared to expenses is something I don’t think many people were chattering about last year, when Alibaba stock was all the rage and the darling of the IPO market.
The company’s record-setting, biggest-ever IPO debuted to a whole lot of fanfare last September, but after the initial surge into November, the BABA magic carpet has fallen out of the sky.
More Pain for Alibaba Stock
Adding to last week’s hiring freeze announcement, last Friday there was another reported misstep in Alibaba’s employment profile, as the company withdrew a job advertisement seeking candidates who resemble a popular Japanese porn actress.
Alibaba was seeking applicants for “programmer cheerleaders,” a position responsible for helping to motivate the company’s male-dominated programming force to wake up in their morning meetings. The add in question sought applicants with physical appearances similar to adult film star Sora Aoi.
I’m pretty sure that kind of ad wouldn’t go over too well on Monster (MWW).
These two recent BABA bobbles have given traders a lot of reason to dump shares, and Alibaba stock is down 5% over the past week. So, is there anything in the near future capable of giving BABA a little bullish magic?
The next bullish catalyst for Alibaba stock may come Thursday before the opening bell, when BABA is slated to report its fiscal 2015 fourth-quarter earnings report.
Consensus estimates for Q4 are for a profit of 43 cents per share on revenue of $2.78 billion. China stock watchers I’ve spoken with have given me an unofficial “whisper” EPS number of 47 cents.
I suspect that if Alibaba can come close to that 47 cents per share number, and at least meet consensus expectations on the top line, then buyers might have reason to step into China’s version of Amazon (AMZN).
The flipside here is that, if the company fails to rise to the whisper, and/or falls significantly short of estimates on the top line, then this magic carpet ride is going to keep losing altitude.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.