Stock of the day 06/05/2015 – BT Group PLC/Alibaba Group Holdings Ltd

Earnings season rumbles on, with a British institution announcing its latest figures, whilst the new (big) kid on the block reveals the state of its 2015 so far.

First up is BT Group PLC, which reveals its Q4 2014/15 earnings release on Thursday. A fairly flat 2014 saw BT gradually increase from £3.80 to £4.02 across the 12 months. However, 2015 has been slightly more robust for the telecommunications company, with a low of £3.86 in the first week of January giving way to a £4.71 high by the end of March; BT is currently trading at £4.51.


(Source: IT-Finance.com 06/05/2015)

The biggest news surrounding BT, and the main catalyst for its 2015 growth, has been is its attempted push into the mobile market in a race with Sky to establish itself as a ‘quad play’ company. BT’s intended takeover of EE would cement the final piece of the broadband, television, telephone (mobile and landline) and wireless puzzle. However, it will have to undergo competition scrutiny from watchdogs before the deal can go ahead, with some reports suggesting this delay may take until the year. Obviously this EE deal has potentially huge ramifications for BT’s consumer revenues in the future and any news about the merger will be catnip for investors, who will be primed and ready for more clarity on the takeover.

However, everything comes at a cost, and BT’s biggest issue may be exactly that: costs. A whopping £12.5 billion for EE alongside nearly a billion for its 42 Premier League games quickly starts to add up, especially when you also take into account a pension deficit of £7 billion. Yet analysts remain bullish on the stock due to its ‘quad play’ intentions, giving BT a consensus rating of ‘buy’ with an average target price of £4.53.

Thursday afternoon then sees Alibaba Group Holdings Ltd announce its Q4 2015 earnings release after a post IPO life that hasn’t gone exactly to plan. Since its November peak of $119.32 Alibaba has been steadily declining, with the company starting 2015 at $104.23. After the company’s third quarter in January results missed estimates the stock fell by around 12% to $89.76, near its September IPO. Alibaba then reached a fresh all-time low of $77.75 this week after the announcement of a hiring freeze until the end of 2015, as founder Jack Ma claimed the company has ‘really developed too quickly’ in the past year.


(Source: IT-Finance.com 06/05/2015)

In terms of its earnings release Alibaba won’t have the Single’s Day and 12.12 sale boost of Q3; however it also won’t have to contend with the counterfeit products problems of the last quarter. There will also be the issue of Chinese New Year, a notoriously quiet period for business in China due to the overlap between its own holiday preparations and the sluggish comeback from the western world after Christmas, something that will likely have a negative bearing on Alibaba’s results.

Investors are also worried about the increasing presence of the company’s mobile business, expected to contribute 47% of all transactions on Alibaba’s various sites compared to 42% last quarter, something many feel could hamper revenue growth. Analysts have reflected this slowdown, expecting revenue to grow by 37% compared to the rapid 53.7% seen in the third quarter. Yet despite the bad buzz around the company, and the limp performance of its stock, analysts are still confident in Alibaba, giving it a consensus rating of ‘buy’ and an average target price of $105.52.