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Alibaba Group Holding is set to report its earnings on August 10th. The company has faced challenges in recent years due to a struggling economy, the “Zero-COVID” policy in China, and government scrutiny. However, there are signs of improvement in the Chinese economy, and the Zero-COVID policy is no longer in effect. Investors also believe that the billion fine imposed on Alibaba affiliate Ant Group marks the end of the government crackdown.

Alibaba holds a strong Zacks Rank of “Buy,” which is based on recent revisions to its earnings estimates. Five analysts have raised their EPS estimates for BABA in the past 60 days, while only three have decreased them.

The company has had a history of positive earnings surprises, delivering beats for seven straight quarters. In the past two quarters, Alibaba has exceeded earnings expectations by a healthy margin of 20% and 21.83%.

On the day of earnings, the price action response for Alibaba has been mixed. However, there have been significant changes recently, including Chinese equities being in a bull market. The iShares China Large-Cap ETF (FXI) has seen a 20% increase since the bottoming out in late 2022.

The Chinese government has also taken action to stimulate the economy and counter the months-long slump in the stock market. Weak economic data has prompted the government to implement stimulus measures.

Alibaba’s return-on-equity (ROE) is turning higher for the first time since 2018. The company has been focusing on catering to foreign, high-quality merchants and improving its monetization rate. The introduction of new mobile apps has also helped Alibaba gain momentum.

The popularity of online shopping is on the rise in China, thanks to the widespread availability of low-cost telecommunication infrastructure. With an 80% market share, Alibaba is well-positioned to benefit from this trend.

Additionally, Alibaba is looking to expand to foreign markets, including the US. The company operates an American website called 11Main.com and sees the potential for growth in such a large market.

Alibaba’s valuation is currently attractive, with a price-to-sales (P/S) ratio at an all-time low of 2. The company is expected to see increased growth in the coming quarters.

Overall, while Alibaba has faced challenges in the past, there are positive indicators for its future performance. Investors will be watching closely for the company’s earnings report.

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