February 1, 2018
This morning, China's answer to Amazon.com released results for its third quarter in fiscal year 2018, and company management said they "had another great quarter driven by the continued strength of the Chinese consumer and the wide and innovative range of services we provide." Today, we'll take a look at how the market reacted to these results and what they mean for you.
Alibaba Group Holding Limited (BABA) is China's largest online and mobile commerce company, offering solutions primarily for businesses. The company operates through four businesses spanning core commerce, cloud computing, digital media and entertainment, and innovation initiatives.
In addition, Alibaba operates several platforms and programs, including Alibaba.com, the wholesale online marketplace becoming recognized as China's Amazon. Alibaba also offers big data analytics and a machine learning platform.
Today, Alibaba noted that annual active consumers on their Chinese online retail marketplaces increased 16% year-over-year, to 515 million. Mobile monthly active users, driven largely by Taobao, the company's artificial intelligence app, jumped 18% year-over-year to 580 million.
During the quarter, revenue soared 56% year-over-year to RMB 53,482 million, or $12.76 billion. Taking a closer look at the details, revenue from Alibaba's annual Global Shopping Festival (Singles Day) came in at RMB 168.2 billion, or $25.9 billion, a record high for the company. In addition, the company's cloud computing revenue surged 104% year-over-year to RMB 3,599 million ($553 million). And revenue from core commerce climbed 57% year-over-year to RMB 83,028 million ($11.3 billion).
Net income attributable to shareholders grew 35% year-over-year to RMB 24,073 million, or $3.7 billion. Adjusted earnings per share were $1.63. The analyst community was looking for earnings of $1.67 per share on $12.68 billion in sales. So Alibaba posted a 2.4% earnings miss and a slight sales surprise.
Alibaba also announced that they have agreed to take a 33% equity stake in Ant Financial, an Alibaba affiliate that handles most transactions on Alibaba's e-commerce site.
Looking ahead, Alibaba lifted its fiscal year 2018 guidance. The company now expects 55% to 56% annual sales growth in 2018, which is up from previous estimates for 49% to 53% annual sales growth.
Despite the strong sales results and forward looking guidance, BABA shares are pulling back in pre-market trading this morning. The earnings miss, as well as the stake in Ant Financial, has Wall Street concerned, given that Alibaba hasn't held a stake in Ant Financial before. However, considering that Alibaba is putting up record sales growth figures and consistently taking steps to stay competitive, such as their newly formed partnership with Chinese supermarket chain Sun Art Group Limited, I look for clearer heads to prevail and for shares to bounce back strongly.
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However, if you aren't ready to give Blue Chip Growth a try today, stay tuned into this blog where I'll continue revealing some of the biggest winners and losers of this earnings season.