Alibaba announced on Friday that it would be releasing earnings on November 18th.
This is a full two weeks later than most people expected them to come out.
BABA stock sold off on the news, which could have some bearing on its fundamentals.
In this article I will reiterate my long-term bullish call on BABA, while highlighting both positives and negatives of the later-than-expected earnings.
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Michael Loccisano/Getty Images Entertainment Alibaba Group (NYSE: BABA ) stock slid 3% Friday on news that the company would be releasing earnings on November 18th – much later than expected. While no earnings date was announced prior to this, most data platforms were expecting them to come out somewhere between November 3rd and November 11th.
At least some BABA investors were alarmed by the delay. As part of my research for this article, I put out a Twitter (NYSE: TWTR ) poll asking BABA investors whether they thought the delay was cause for concern. 36% of respondents said yes – a minority, but a sizable one. Should we be alarmed that $BABA delayed earnings by 2 weeks? — Andrew B | Growth at a Good Price (@AJButton2) November 5, 2021 So exactly how long of a delay is this?
We can gauge it by looking at BABA’s previous earnings release. Alibaba’s first quarter earnings were released August 3rd. Based on the first quarter earnings date, a Q2 release date this week was expected. NASDAQ.com projected November 4th, Tipranks said November 3rd, and Yahoo! Finance expected November 11th – that was the latest estimate on record before BABA announced they’d come out on the 18th.
It’s important to note that companies are under no obligation to report earnings on a regular schedule. By SEC rules, they have to file 10-Qs within 45 days of the end of the quarter . That leaves a pretty wide window in which to file. However, by convention, companies normally release earnings on a regular schedule to correspond to the actual timing of fiscal quarters.
A typical quarter in a non-leap year has approximately 91 days. If BABA reported every 91 days, then we’d have expected earnings by November 2nd. If it went by a “days from the end of the quarter being reported” standard, we’d get to November 3rd. Either way, the actual release date was much later than what any regular schedule would have predicted.
The markets may have taken that as bad news. The stock slid Friday when the earnings date was announced, but there were other news stories impacting BABA on the same date. For example, Bloomberg reported that Beijing was mulling a takeover of BABA’s South China Morning Post (SCMP) at 6:47 EDT Friday. That could have influenced the selloff as well. So it’s hard to assess exactly how much of a role the late earnings played in the Friday selloff, but it’s plausible that they were a factor.
Delayed earnings can be a genuine cause for concern. Some studies show that late earnings tend to contain bad news. Nevertheless, I remain bullish on Alibaba stock. If you consider possible reasons why it’s taking so long to get second quarter earnings out, some of them are actually encouraging. So while the delay has a vaguely ominous ring to it, I remain committed to my long position. Here’s why. Why Did Alibaba Delay Earnings?
In order to understand the long term implications of BABA’s delayed earnings, we have to consider why they were delayed. Certainly, BABA is under no obligation to report exactly 91.26 days from its previous report, or a uniform number of days from each quarter’s end. But most companies try to stick to some predictable schedule . So we need to investigate why BABA might be pushing its earnings out later than expected.
First, the (potential) bad news:
Research suggests that late earnings are often misses. According to research by the University of Texas and MIT , good earnings tend to be released early while bad earnings tend to be late. The study’s authors claim that companies release “on schedule” (i.e. in keeping with historical norms) 90% of the time. When they report five days late or more, the news is often bad. And investors tend to anticipate this, resulting in selloffs on news of such late reports. That’s consistent with what we saw with BABA on Friday.
Now, on to some potential good news:
There are reasons to believe that BABA’s […]