Alibaba paring some gains on report of `soft’ June quarter due to spending growth

  • Alibaba is paring some earlier gains, now up 2.3%, after Deutsche Bank said the June quarter’s EPS outlook may be “masked by” growing investment spend.
  • Deutsche Bank analyst Vitus Leung said he got the impression about the quarter after a talk with BABA. DB sees June-quarter adj. EBITDA of RMB42B, -7% YoY, though it’s still “slightly more positive” than the Street estimates of RMB40B.

  • Leung said the key indicators for the market for the June quarter are active user numbers and investment spending.
  • “Strategic investments would be front-loaded, and mainly in the community marketplace segment, Taobao Deals, on merchant retentions,” Leung wrote in a note. “We expect BABA to follow through on its strategy of investing its incremental profits for longer-term growth.”
  • Alibaba PT cut to $281 from $282 at DB.
  • Alibaba short interest 2.5% of float.
  • Earlier, Alibaba gains after China approves Tencent-Sogou deal; BABA reportedly weighing bid for Unisplendour stake.

Author: Josh Fineman, Seeking Alpha

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