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May 6 2015, 06.35am GMT


On Thursday, Alibaba (NYSE: BABA) will be in the spotlight when the Chinese Internet giant reports its earnings results for the fiscal year and quarter that ended in March 2015.

Coming off the back of unimpressive results from other Internet giants like LinkedIn and Twitter, Wall Street participants will be closely watching this earnings report. Alibaba’s stock has been trading on a negative sentiment throughout the last couple of months on the heels of concerns around increased regulatory pressures and slowing growth. Close to its 52 week low, the stock is trading down at just over $80 from around $100 to $110 in December 2014.

These quarterly results may see an impact from Alibaba’s efforts of restricting counterfeit products selling on its marketplace. In addition to this, the mobile platform’s share growth in the overall GMV (gross merchandise volume) could further negatively impact on growing the top-line because of lower rates of monetization on mobile devices. Expectations are that profits will decline in the quarterly earnings results which will be attributed to large growth in expenses relating to investments in growth strategies and the acquisitions of new businesses.

Nevertheless, given the short-term issues relating to counterfeit products sold on its Taobao marketplace and having to deal with the associated regulatory bodies, there are hopes that the long-term growth potential for Alibaba remains positive because of the rapid upward trend of the ecommerce market in China.

Although the Internet penetration rates were recorded at 47.9% and the number of users shopping online at 360 million people in China, expectations are that these numbers will increase to more than 65% and 700 million respectively over the long-term.

Helping to grow its demand in the next few years is Alibaba’s expansion strategy to offer new product categories like healthcare, food products, furniture and car accessories which will help with further distributing to rural areas and lower-tier cities.

The mobile users share in the company’s overall GMV has increased quickly from 19.7% in the fourth-quarter 2013 to 41.5% tin he same quarter in 2014. Is has also seen a rapid increase in its monthly active mobile user base by 95% yearly to 265 million in the fourth-quarter of 2014, accounting for about 80% of the total yearly active buyer base.

Due to the smaller screen, its mobile platform has a smaller monetization rate of 1.96%, compared to the 3.2% desktop monetization rate. This has contributed to revenue growth to lag GMV rise on the company’s marketplaces and expectations are for this trend to persist throughout the current quarter. In the long-term, mobile monetization rates are expected to move more in-line with desktop rates with improved targetability and quality of mobile adverts.

Also closely watched are the PC monetization rates, as these have decreased in the last quarter due to resistance relating to the monetization of pay-for-performance.

MT4 Chart: Alibaba

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