Alibaba's performance in the last quarter, as revealed in their financial report, largely met market expectations, with revenue increasing by 8.5% year-on-year to ¥224.8 billion.
Alibaba Financial Report Outlook: E-commerce and Cloud Business Will Be Investors' Focus
The core businesses Taobao and Tmall Group saw revenue growth of 3% to ¥97.7 billion, while the Local Services Group recorded a 16% year-on-year revenue increase to ¥15.6 billion. Alibaba's international revenue grew by 53% to ¥24.5 billion, and the Cloud Business division's revenue increased by 2% to ¥27.6 billion.
Alibaba's international business showed the highest revenue growth, while its core businesses, Taobao, Tmall, and Cloud Business, all exhibited a slowdown. In contrast, Alibaba's competitor, Pinduoduo, had a remarkable performance in 2023, rising by 79.4% and briefly surpassing Alibaba to become the top-listed Chinese concept stock in the U.S. The rapid growth of Pinduoduo contrasts with the sluggish performance of Alibaba's e-commerce business, reflecting weakened consumer demand for higher-priced goods in China.
Meanwhile, Alibaba announced that it would not proceed with the full separation of Alibaba Cloud, citing uncertainties related to chip restrictions. Additionally, the IPO process for Hema, Alibaba's grocery and fresh food subsidiary, has been temporarily halted.
Even though Alibaba announced its largest dividend since its U.S. listing in 2014, with a total payout of $2.5 billion, this move did not salvage the weak stock price. Alibaba's stock price declined continuously from November 16, reaching a low of $66.63. This reflects that, against the backdrop of diversified consumption channels in China, consumer downgrading has impacted the growth of Alibaba's core businesses, and concerns about the suspension of Alibaba Cloud's separation have raised worries about new growth engines for the business.
Alibaba's Possible Third Quarter Performance Expectations for Fiscal Year 2024:
Alibaba (BABA) is set to announce its third-quarter financial results for the fiscal year 2024 before the U.S. stock market opens on February 7. Four analysts from Zack Investment Research predict revenue to reach $37.21 billion, a year-on-year growth of 3.6%, with an estimated earnings per share of $2.73, a year-on-year decline of 2.15%.
On January 23, market news revealed that Alibaba's founder, Jack Ma, and Vice Chairman Joseph Tsai significantly increased their holdings of Alibaba stocks, countering previous rumours of Jack Ma selling Alibaba shares. As a result, Alibaba's stock price rose by 7.85% on the same day, but subsequent trading days did not see a continuous rebound, with the stock price consistently remaining below the 60-day moving average.
In the last quarter, Alibaba's six major business segments all showed robust year-on-year growth, reflecting Alibaba's preliminary achievements in continuous organisational adjustments and optimizations. However, this has not yet proven the long-term effects of the reforms to the market.
Investors will continue to focus on the growth of Alibaba's two core business segments: e-commerce and cloud business.
In the context of consumer downgrading, the competition between traditional and emerging e-commerce platforms is becoming more intense, with both sides striving to attract cost-conscious consumers. Examples includeJD.com's "Billion Subsidy" plan and Douyin's "Multi-order Discount" activities. At least for now, Alibaba does not appear to have gained a significant advantage in this price war.
In addition, with the rapid development of AI, the combination of AI and e-commerce has become a market focus. Alibaba's ability to achieve a leading position in the field of cloud computing will determine the future growth engine of the business. Currently, this business is facing the challenge of slow growth. Alibaba Cloud underwent organisational optimization in November of last year, and whether this reform can bring significant effects will influence the future trend of the stock price.
Risk Factors:
Sluggish growth of e-commerce business due to a weak macroeconomic environment, falling short of peer performance.
Continued slowdown in the growth rate of cloud business.
Returns on key investment projects lower than expected.
This article was originally published on CMC Markets by Zhujun Li
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