Alibaba Group Holding (ALIBABA) slashed its outlook for its current fiscal year along with the release of its September quarter results yesterday that missed analyst estimates for a second straight quarter. ALIBABA’s Hong Kong listed shares fell 5.3% while its U.S. listed shares fell 11.1% on Thursday.

Whether bullish or bearish, investors may gain leveraged exposure to ALIBABA as well as the Hang Seng TECH Index via the calls and puts listed on Bursa Malaysia.

Leading up to yesterday’s earnings release…

The 14% rebound in Chinese tech stocks in Hong Kong from this year's low in October is being challenged by potentially weaker earnings from industry bellwethers, which will provide insight into the impact of China’s regulatory crackdown on profit number. The earnings reports are crucial to investors who are enjoying a rare bounce in the Hang Seng TECH Index (HSTECH), which saw US$1 trillion of market value eroded during China's year-long crackdown on the tech sector.

ALIBABA saw one of the heaviest fines of US2.8bil by Chinese authorities in April on the back of the big tech crackdown. The stock which had tumbled as much as 49% to a record low from its February highs, has since rebounded 22% from its October lows, but is still trading at a relatively cheap price-earnings ratio of 17 times, having cheapened from a two-year average of 23 times, according to Bloomberg data.

Lackluster Results and Guidance

Yesterday, ALIBABA missed revenue and earnings expectations for the September quarter as slowing economic growth in China weighed on results, adding to regulatory headwinds. In an announcement on the HKEX, ALIBABA recorded a revenue of RMB200.7bil (+29% year-on-year (y-o-y)), while net income was RMB3.4bil. Earnings per share (EPS) was RMB11.2 (-38% y-o-y). According to an article on CNBC (18 Nov), both revenue and EPS were below Refinitiv estimates of RMB204.9bil and EPS of RMB12.36.

Further, the company slashed its revenue guidance for its current fiscal year; it previously expected a revenue of RMB930bil (+29.5% y-o-y) but now expects growth to be between 20% to 23% y-o-y.

Source: Macquarie Research - 19 Nov 2021