Alibaba spreads wings in bid to defy expectations of flagging growth
ALIBABA Group Holding forecast sales growth that topped every analyst’s estimate, defying expectations that growth must slow by dint of a decelerating economy and its own sheer scale.
China’s largest e-commerce company forecast 45 to 49 percent revenue growth in the year ending March, sustaining a near-unbroken run of 40 percent-plus annual rises and underscoring how investments into businesses beyond its bread and butter of online shopping are paying off. The company’s German shares rose as much as 5.2 percent.
Alibaba and Tencent Holdings – which dominate online shopping and social media, respectively – have ventured deeper into new areas from cloud computing services to streaming music and video as the country’s economy slows. The online shopping giant founded by billionaire Jack Ma is capturing more digital advertising spending by incorporating social elements such as video in its shopping sites.
To reflect an increasingly diverse customer base, Alibaba will start reporting “active consumers” as opposed to just buyers, chief financial officer Maggie Wu said during the company’s annual investor-day conference yesterday. It’ll begin to disclose “customer management revenue” instead of just online marketing to reflect a broader base of advertising platforms.
“Its market valuation has fallen behind Tencent’s recently, so the forecast could inject some confidence,” said
While the company performed well, investors remain concerned over China’s economy
Ray Zhao, an analyst at Guotai Junan Securities.
“This will be good news for its share price, which could rise 6 to 7 percent based on this forecast,” he added.
Alibaba is spending billions of dollars on new businesses in part to counter Tencent’s increasing dominance of online social media and entertainment through WeChat, a messaging and networking powerhouse.
Alibaba has expanded abroad since buying control of Lazada Group SA to establish a foothold in South-East Asia. Its AliExpress site remains for now the main window through which it targets foreign shoppers.
While Alibaba has outperformed expectations, investors remain concerned about a deceleration in China’s economy and similar efforts by Tencent to capture digital ad spending and muscle in on its turf.
In response, Alibaba moved into untapped rural markets and explored new sources of income.
However, most of those new businesses are years away from contributing to the bottom line.
Yesterday, Wu said Alibaba would continue to sacrifice a small slice of profitability to help bankroll its forays.
Cloud computing services now account for about 5 percent of overall sales. The priority remains expansion for now, Wu said. – Bloomberg
Billionaire Alibaba founder Jack Ma at the World Economic Forum in Davos, Switzerland, in January. The group has moved into uncharted waters in a bid to remain competitive.