Alibaba Group steps up stock buy-back in Hong Kong, New York as e-commerce rivalry, earnings outlook worry investors

E-commerce group spent US$4.8 billion in the quarter to March 31, the most since late 2021 to support the stock in Hong Kong and New York
Analysts have trimmed their 12-month price targets by 14 to 15 per cent this year amid concerns about its earnings outlook

Hong Kong stock market

Aileen Chuang

Published: 10:54am, 3 Apr 2024

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Alibaba Group Holding, China’s biggest e-commerce platform operator, said it bought back US$4.8 billion worth of its own shares in Hong Kong and New York last quarter, marking the most aggressive buy-back since 2021 as the stock slipped amid concerns about competition and earnings outlook.

The company repurchased 524 million ordinary shares, or the equivalent of 65 million American depositary shares (ADS), during the first three months this year, according to a stock exchange filing on late Tuesday, versus US$1.9 billion in the same quarter last year. It spent US$2.9 billion in the final three months of 2023.

The March quarter buy-back reduced Alibaba’s share capital base by 5.1 per cent, or 1.057 billion shares, well ahead of its 3 per cent minimum annual commitment. It was also highest outlay since it spent more than US$5.1 billion on stock buy-back in the September 2021 quarter.

In all, Alibaba Group used up US$12.5 billion from its cash hoard on buy-back in the fiscal year to March 31, versus US$10.8 billion in the preceding 12 months, the filing showed. It had just under US$92 billion of cash and cash equivalent on December 31 last year.

Joe Tsai, co-founder and chairman of Alibaba Group. Photo: AFP

Alibaba Group, based in Hangzhou in eastern Zhejiang province, owns of the South China Morning Post.

The e-commerce group had earlier upsized its programme by US$25 billion, expanding its dry powder to US$31.9 billion through March 2027 after the latest spending. The decision, it said, underlined the board’s confidence in the business outlook, while boosting per-share earnings and cash flow for shareholders.

“The robust execution of our share repurchase programme shows our strong confidence in [the] company’s future growth and the delivery of our commitment to enhance shareholder value,” the company said in a separate statement on Tuesday. The move aligned with its focus on “unlocking value to improve shareholder returns.”

In his first earnings call as chairman in November 2023, co-founder Joe Tsai laid out the firm’s priority for cash use, which is to invest in future growth and execute its shareholder returns programmes, including stock repurchase and dividend distribution plans.

Alibaba shares dropped 0.9 per cent to HK$70.35 on Wednesday in Hong Kong, bringing the decline this year to about 6 per cent. Its ADS was little changed at US$72.91 on Tuesday in New York. The group last month reported weaker than expected results for the December quarter amid competition from PDD Holdings and JD.com.

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Analysts tracking the stock have continued to be downbeat about the stock outlook. They have trimmed their 12-month price targets for Alibaba’s shares by 14 to 15 per cent this year, to HK$102.75 and US$106.50, according to data compiled by Bloomberg.

The stock has also taken some beating after the group walked back some of its targets under its internal business reorganisation. That included cancelling plans to spin off its cloud-computing business, freezing the listing of grocery chain Freshippo, and withdrawing Cainiao Smart Logistics listing application in Hong Kong.

At a conference call in February, Tsai said Alibaba was not in a hurry to list Cainiao or Freshippo because market conditions were “just not in a state where we believe we can really truly reflect the true intrinsic value” of the businesses, he said.

Additional reporting by Li Jiaxing