By Elsa Ohlen

Alibaba stock rose after the Chinese online retailer posted fiscal second-quarter earnings that beat analysts' estimates but revenue that missed forecasts.

Adjusted earnings per American-listed share were 15.06 yuan ($2.15) on sales of 236.5 billion ($33.7 billion) yuan for the quarter ended Sept. 30.

Analysts had expected adjusted earnings of 14.82 yuan a share on sales of 239.5 billion yuan, according to FactSet.

Alibaba's American depositary receipts, or ADRs, were up 2.9% to $93.54 in premarket trading Friday.

The stock has risen 17% this year, trailing the benchmark S&P 500, which has gained 25% in 2024.

This is breaking news. Read a preview of Alibaba below and check back for more analysis soon.

Alibaba's Friday earnings will shine a light on the health of the Chinese consumer.

The Chinese technology and e-commerce giant, is often seen as an economic bellwether and what the results reveal about spending habits will be a focus as China battles a sluggish economy where consumers would rather save than spend.

Wall Street is looking for adjusted earnings of 14.82 yuan ($2.05) on sales of 239.5 billion yuan ($33.2 billion) for the quarter that ended Sept. 30, according to FactSet data. That would be a slight decrease compared with last quarter, but 6.5% more than in the same period last year.

Alibaba earnings have underwhelmed recently, partly due to declining margins as the company competes with rivals JD.com and Temu-owner PDD on price. The threat of higher tariffs from the incoming Trump administration on on Chinese imports has also weighed on the stock lately.

There are, however, signs that things could be about to turn around for Alibaba.

The stock is up almost 18% so far this year. Most of those gains took place over the past two months as news on China's efforts to boost its sluggish economy with various stimulus sent Chinese stocks up. J.P. Morgan analyst Alex Yao said it also looks to regain market share lost to PDD.

Yao predicts that China's e-commerce market will enter a new stage marked by slower industry growth and more benign competition, which should be favor Alibaba from a user and supply chain perspective. "We expect Alibaba to stabilize its market share to mid-thirties percent in the next couple of years," Yao wrote in a research note Wednesday.

Alibaba's position in e-commerce could be strengthened with advances from its cloud business and artificial-intelligence services.

Alibaba was a Barron's stock pick last month. Despite recent gains its shares are still trading cheap at 10.4 times forward earnings. Amazon.com, by comparison, fetches 35.3 times forward earnings.

Rival online retailer JD.com posted quarterly earnings Thursday that beat estimates, and CEO Sandy Xu said that overall consumer sentiment is brightening.

Yet, investors didn't reward JD shares which fell in the immediate hours after the report. One interpretation is that the market doesn't believe China's economic woes are over yet. Alibaba may need to not just beat expectations, but wow investors to see a bump in its share price.

Often considered a bellwether for China consumer spending, Alibaba's earnings should provide early evidence on whether China's stimulus measures are working.

Write to Elsa Ohlen at elsa.ohlen@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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November 15, 2024 06:51 ET (11:51 GMT)

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