Online behemoth Alibaba takes hit as growth cools
China’s Alibaba saw shares take a sharp hit Wednesday as a disappointing quarterly report showed sales growth cooling.
Profit in the quarter ended June 30 doubled to US$4.97 billion (30.8 billion yuan), mainly due to one-time gains of US$3.9 billion from the sale of its stake in film unit Alibaba Pictures.
But Alibaba shares tumbled more than five percent to close in New York at US$73.38 on disappointment over revenue growth.
The company said revenue, which excluded one-time gains, rose 28 percent from a year ago to US$3.27 billion (20.2 billion yuan), below analysts’ expectations of US$3.39 billion.
“The report itself shows some robust growth across many of the company’s closely watched metrics, yet the problem for investors is that the growth still did not live up to heightened expectations,” said analysts at Briefing.com.
“The added problem for Alibaba is a macro (economic) problem, and specifically the slowdown that is happening in China. Alibaba is of course working to expand its business internationally, but it is the Chinese consumer that drives its business.”
Cantor Fitzgerald analyst Youssef Squali said in a research note that Alibaba is likely “to continue to dominate the rapidly growing Chinese e- commerce market for years to come, but we also believe that near-term pre- dictability of growth and margins has deteriorated given the macro backdrop in China.”
The rise in sales was driven by retail trade in China, which accounted for 78 percent of revenue in the first fiscal quarter, the company said in a statement.
Chief executive Daniel Zhang said the company had “a strong quarter and we continued to build the foundations for future growth.”
He added that “we are excited about our top strategic priorities, including internationalization, winning in mobile, expanding our ecosystem from cities to villages, and investing in core technologies that will propel our cloud computing business.”
Chief financial officer Maggie Wu said Alibaba was generating more revenue from users of mobile devices in China.
She hailed “significant progress monetizing our mobile traffic, with our mobile revenue exceeding 50 percent of our total China commerce retail revenue for the first time.”
The company also said it authorized a US$4 billion share buyback plan over two years, which could help boost Alibaba’s share price.
Alibaba shares slumped to their lowest level since its recordbreaking public offering in 2014 at US$68 a share.
Separately, Alibaba said it had reached a deal with Macy’s to bring a selection of the US retailer’s merchandise to Chinese consumers.