Chinese internet stocks have been making waves, and with earnings season in full swing, Alibaba (NYSE: BABA) is set to test two exchange traded funds that are exposed to China’s burgeoning technology sector.
For instance, the KraneShares CSI China Internet Fund (NasdaqGM: KWEB), which targets Chinese internet stocks, includes a 10.2% tilt toward BABA and the Renaissance IPO ETF (NYSEArca: IPO), which follows new initial public offerings, includes a 10.6% position in BABA. Year-to-date, KWEB is up 10.5% and IPO is 5.3% higher.
After deputing with a record-breaking $25 billion IPO, Alibaba is trading at a forward price-to-earnings ratio pegged at over 45, supported by some of the most attractive profit margins in the global e-commerce industry, Reuters reports.
“The stock is now trading at a pretty high multiple, and in order to justify that, they need to show really strong results out of the gate,” Wedbush Securities’ Gil Luria said in the article.
Traders will have a clearer picture after Alibaba releases its first earnings results Tuesday, November 4. According to average analysts’ expectations, the company is expected to show net profits of $1.17 billion over the third quarter, with earnings per share at 36 cents.
Moreover, in the Chinese internet space, competing e-commerce firm Vipshop (NYSE: VIPS) is expected to issue earnings over November 11.
According to Arete Research Asia analysts Muzhi Li and Richard Kramer, Vipshop provides customers with the first pick of the large pile of overstocks for off-season inventories, which will helps generate more traffic and an edge over competitors, reports Shuli Ren for Barron’s.