BABA: Compete Smartly Without Irrational Spending; Positive On FY1Q20 Performance; Maintain Buy
BABA will report FY1Q20 results on August 15th before the markets open with a 7:30am EST conference call. We are positive into BABA’s FY1Q20 performance. In 2Q19, BABA needed to compete on at least two fronts: with Pinduoduo (PDD, $22.30, Not Rated) in lower tier city commerce and also competing with Meituan (3690.HK, HK$63.65, Not Rated) on food delivery. From our observation, BABA applied smart ways of competing without irrational spending. Based on our data and model, we believe BABA is likely to deliver better FY1Q20E results on both top line and bottom line. We maintain our Buy rating.