Most Active

Alibaba Group Holding Ltd (NYSE:BABA) Strong Report Masked by Weak Big-Cap Tech Tape

Alibaba Group Holding Ltd (NYSE:BABA) its financial results for the quarter ended September 30, 2018. The company reported Q2 (Sep) earnings of $1.40 per share, excluding non-recurring items, $0.30 better than the S&P Capital IQ Consensus of $1.10; revenues rose 49.6% year/year to $12.4 bln vs the $12.51 bln S&P Capital IQ Consensus. The market responded reasonably well initially, though the stock ended lower. But big cap tech spent most the Friday session under pressure, so this shouldn’t be taken as a sign of a major negative reaction to the data.

“Alibaba had another strong quarter of rapid growth. In particular, annual active consumers increased by 25 million to reach 601 million in the 12 months ended September 30, 2018,” said Daniel Zhang, Chief Executive Officer of Alibaba Group. “We generated synergies across our businesses, demonstrating the power of the Alibaba digital economy, which will be further showcased during our upcoming 11.11 Global Shopping Festival. Under our New Retail strategy, we are realizing our vision to enable renewed growth for traditional retailers through digitizing their store-based operations, powered by Alibaba’s technology and consumer insights.”

Alibaba Group Holding Ltd (NYSE:BABA) bills itself as a company that, through its subsidiaries, operates as an online and mobile commerce company in the People’s Republic of China and internationally.

This is Jack Ma’s Chinese version of Amazon, or so the popular understanding goes.

The company operates in four segments: Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives and Others. It operates Taobao Marketplace, a mobile commerce destination; Tmall, a third-party platform for brands and retailers; Rural Taobao program that enables rural residents and businesses to sell agricultural products to urban consumers;, an online wholesale marketplace;, an online wholesale marketplace; AliExpress, a retail marketplace; Lazada, an e-commerce platform; and Lingshoutong, a digital sourcing platform.

The company also provides pay-for-performance and display marketing services; and Taobao Ad Network and Exchange, a real-time bidding online marketing exchange in China; and digital payment and financial technology platform services.

In addition, much like Amazon, it offers cloud computing services, including elastic computing, database, storage, virtualization network, large scale computing, security, and management and application services, big data analytics, a machine learning platform, and Internet of Things and other service for enterprises; and payment and escrow services; and movies, TV drama series, online dramas, variety shows, news feeds, games, literature and music, and other areas through various content platforms, as well as develops and operates mobile browsers.

Further, the company provides AutoNavi, a mobile digital map, navigation, and real-time traffic information; DingTalk, a proprietary enterprise communication and collaboration platform; and Tmall Genie, an AI-powered voice assistant, which helps consumers to shop, order local services, search for information, control smart appliances, and play interactive content.


Growth, Cash, Cloud

As noted above, the company just dropped earnings. Management commentary was strong.

“We outpaced all industry peers by again delivering robust revenue growth of 54% this quarter,” said Maggie Wu, Chief Financial Officer of Alibaba Group. “While the growth of our overall profitability this quarter has been tempered by significant investments in local services, logistics, entertainment and international expansion, our core marketplace business continued to show strong profit and cash flow growth, which enables us to re-invest into strategic areas and our technology.”

“Looking ahead, we are revising our fiscal year 2019 revenue guidance to a range of RMB375 billion to RMB383 billion. The new guidance range reflects a 4% to 6% adjustment to the original revenue guidance. In light of current fluid macro-economic conditions, we have recently decided not to monetize, in the near term, incremental inventory generated from growing users and engagement on our China retail marketplaces. We expect this decision to benefit SMEs on our marketplace platforms.”

Our notes from the conference call include a nod to Youku’s daily average subscriber growth (continued to be robust, increasing over 100% year-over-year during the quarter), strong cash flow, 56% core commerce sales growth, and strong growth in cloud.

Leave a Comment

Your email address will not be published.