Online be­he­moth Alibaba takes hit as growth cools

The China Post - - WORLD BUSINESS -

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 Brief­

“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.

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