Alibaba: beats on revenue, earnings, and increased guidance
Chinese Ecommerce giant Alibaba reported staggering earnings results last week, spurring it to raise its guidance, as sales rose at their fastest pace since Alibaba’s 2014 IPO. The company saw revenue growth of 61%, driven by 63% growth in its core Ecommerce segment and an incredible 99% growth in its cloud computing segment. All of these figures are reported year on year. The company also saw an increase in monthly active users to 550 million, and active customers to 448 million. Free cash flow increased 61.9% against the year-ago quarter.
Alibaba’s share price has risen by an incredible 109% so far this year
SOURCE: Yahoo Finance
Alibaba is seeking to push into China’s $605 billion traditional retail sector, and is enlisting half a million “mom-and-pop” shops as merchants on its platform. The company also has a $30 billion spending plan for a wide range of tech sectors (from AI to cloud computing and more). Atlantic Equities analyst James Cordwell says: “They have multiple drivers of growth though, namely core e-commerce, impressive international expansion and cloud business.” – taken in tandem with the powerful Chinese economy, these factors have helped Alibaba to continually pursue growth despite its giant size (during this last rally, Alibaba has added $250 billion to its market cap).
Alibaba is committed to pursuing growth through inward investment – drawing, no doubt, the inevitable comparisons with another Ecommerce titan, Amazon. The group’s co-founder, executive vice chairman, and second-largest shareholder (after Jack Ma), Joseph Tsai, spoke pointedly to this strategy on the company’s most recent earnings call, saying: “Our impressive results demonstrate the importance of investing for the long run. Sometimes long-term investing cuts into short-term profitability. This is where we feel adamant that responsible managers of businesses must choose long-term benefits over short-term results.”
With a favourable economic backdrop and investments, seemingly, everywhere, can Alibaba continue to reach new heights in the coming months? The company’s executives certainly seem to think so.
Dominion holds Alibaba in its Global Trends Ecommerce Fund.
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