China’s Price War Puts Alibaba Under Spotlight Before Earnings

An intensive price war in China’s food distribution industry is damaging the country’s e-commerce giants more than expected and forces analysts and investors to reduce stock price targets.

Investors are still waiting for three-month results from Alibaba Group Holding Ltd. While JD.com Inc.’s latest food distribution losses were larger than expected, Meituan’s shares fell this week after warning about big losses due to “irrational competition”.

Investors are waiting for Alibaba to follow the tendency of their earnings, and cloud computing profits are likely to be in the shade with subsidies and discount costs in the food distribution sector. Considering the expectations that each or any price war will only worse, it can increase the increasing questions about the appearance of the three companies’ share prices.

“We are not very optimistic about a sector defined by price wars,” Franklin Templeon Portfolio Manager Nicholas Chui said. “If a market dominated by a company, the competition will be more violent and violent. It is difficult to see where the end will be.”

Investors will closely monitor the segment results from the local services group of food and grocery distribution services such as Ele.Me and AMAP. According to a Bloomberg survey based on pre -tax and depreciation earnings, interest payments are likely to have lost 3.3 billion yuan in the quarter of the end of June.

However, more important than the figures of the last quarter, Alibaba’s management team will have clues to how much they are willing to spend to get the market share.

JPMorgan Chase & Co. Analysts on Thursday in a note, including Alex Yao JPMorgan Chase & Co. Analysts, Alibaba’s food presentation for the next 12 months, “aggressive investments” they expect to continue, “the food distribution competition is now the most powerful resources and the commitment to gain market share,” he wrote.

For companies engaged in price battles, the earnings of earnings between competitors is not a bad sign. The chance that competitors may be forced to retreat first can encourage further aggressive expansion. In a report on Thursday, Bernstein analysts, including Robin Zhu, wrote that Meituan’s “Blood in the Water would encourage Alibaba, although the three companies had previously promised to prevent irregular competition.

However, the latest earning reports for investors offer a clear warning about the damage to intense competition. Meituan’s average price target given to their shares by analysts fell 26% since the beginning of the second quarter, JD.com’s average price target fell by 22% and Alibaba’s 11% fell 11%.

More than one analyst has cut price targets for Meituan’s shares after earnings this week.

Morgan Stanley is waiting for Alibaba’s instant trade investments to hit 20 billion yuan in the last three months in September – twice the previous quarter. JPMorgan analysts expect the company to reduce the unity of earnings for the company after Friday results, because it may continue to burn cash to gain market share.

Meituan, according to Goldman Sachs Inc., about 47% of China’s food distribution market as a volume last month, while both Meituan and JD.com said they were dependent on food distribution business.

This article was created from an automatic news agency feeding without changing the text.