Alibaba’s shares rise to two-month high on higher revenue forecast
The e-commerce giant saw revenue surge 54 per cent to 53.25 billion yuan, beating analysts’ estimates of 50.17 billion yuan
Alibaba Group Holding’s shares rose to their highest level in two months, after the world’s biggest operator of e-commerce platforms raised the forecast for its full-year earnings, driven by strong online retail growth, surging demand for cloud computing services and vastly improved digital media business.
“Our robust December quarter demonstrates the strength of the Chinese consumer and Alibaba’s ability to create value across our vast ecosystem,” chief executive Daniel Zhang Yong said on Tuesday, hours before the US stock markets opened.
Alibaba’s revenue jumped 54 per cent to 53.25 billion yuan in the three months to December 31, exceeding the 50.17 billion yuan consensus estimate in a Bloomberg survey of analysts.
Maggie Wu Wei, the chief financial officer at Alibaba, said the company has adjusted its guidance for the current fiscal year to March to 53 per cent year-on-year growth from the previous estimate of 48 per cent, “with three quarters of the year coming in ahead of expectations”.
Alibaba’s shares rose as much as 3.9 per cent to US$103.19, before settling the day at US$101.43, the highest level since October 31. That gives the company a market valuation of US$253 billion, surpassing Tencent Holdings’ capitalisation of US$243 billion.
Revenue from Alibaba’s core e-commerce operations, which include its Chinese platforms Tmall and Taobao Marketplace and overseas-focused AliExpress, grew 45 per cent year-on-year to 46.58 billion yuan.
China’s National Bureau of Statistics last month reported an acceleration in the country’s online retail sales, which saw them grow 25.7 per cent from January to November last year.
“We believe such sector data bode positively for Alibaba’s e-commerce sales for the December quarter,” Nomura research analyst Shi Jialong said.
The highlight of the standout quarter was the firm’s November 11 Singles’ Day online shopping festival, which generated a record US$17 billion of gross merchandise sales in 24 hours.
Alicia Yap, the head of regional internet research at Citi Research in Hong Kong, said Alibaba’s management was “confident about the value proposition it brings to the merchants and brands, and expects to attract higher overall advertising budget over time”.
Mobile monthly active users on the company’s mainland retail platforms grew to 493 million in December, while annual active buyers on those marketplaces reached 443 million.
The Hangzhou-based company’s cloud computing arm, Alibaba Cloud, posted a 115 per cent year-on-year increase in revenue to 1.76 billion yuan, while its operating loss narrowed to 339 million yuan.
The number of paying customers on Alibaba Cloud, the largest provider of cloud services in China, swelled to 765,000 from 651,000 in the quarter ended October 31.
Cloud services enable companies to buy, lease or sell software and other digital resources online, just like electricity from a power grid. These operations are managed in so-called data centres.
Revenue from Alibaba’s digital media and entertainment businesses, led by Chinese video streaming giant Youku Tudou, climbed 273 per cent to 4.06 billion yuan.
Tsang Chi, HSBC’s head of Asia-Pacific internet research, said in a report that Alibaba has been able to encourage users to spend more time on Youku Tudou in the past 12 months, thanks to a mix of popular licensed content and self-produced shows.
“With higher investment and continued execution, Youku could be an important revenue driver for [Alibaba’s] fiscal year 2018,” Tsang said.
Revenue from Alibaba’s so-called innovation initiatives and other businesses advanced 61 per cent to 845 million yuan.
Net income for Alibaba, which owns the South China Morning Post, grew 38 per cent to 17.16 billion yuan, compared with 12.46 billion yuan a year earlier. This was way above analysts’ consensus estimate of 13.75 billion yuan.
Research firm eMarketer predicted that Alibaba, the world’s largest e-commerce services provider, will capture 7.9 per cent of the estimated US$229.25 billion global digital advertising market this year, up from 6.5 per cent last year.