Alibaba (BABA) Stock Hammered after Earnings
Shares of the Alibaba Group Holdings Ltd (BABA) were trading down -6.40 or -6.50 percent to $92.05 per share in this morning's premarket after the company released earnings early this morning. Alibaba reported a better than expected profit for its third quarter, but revenue which did not meet analyst expectations. Alibaba stock closed at $98.45, down -4.49 or -4.36 percent in Wednesday's regular trading session.
Alibaba reported third quarter non-GAAP diluted earnings of $0.81 per share, a +13 percent increase over the same period one year ago. Revenue came to $4.219 billion, an increase of +40 percent over last year's third quarter. Analysts were expecting the company to report earnings of $0.75 per share on revenue of $4.45 billion.
Nevertheless, margins before taxes, interest, amortization and depreciation increased to +58 percent versus a decline in the second quarter to +50.5 percent. Non-GAAP net income came to $2.114 billion, an increase of +25 percent from the same period one year ago, while net income increased to $964 million, a rise of +28 percent versus last year's third quarter.
Jonathan Lu, Chief Executive Officer of Alibaba Group said in the company's press release that, "We delivered a strong quarter with significant growth across our key operating metrics, gross merchandise volume across our China retail marketplaces grew 49% year on year, and our annual active buyers increased to 334 million in 2014, an increase of 45% year on year. Our unrivaled leadership and momentum in mobile continued - we added 48 million active users sequentially and delivered over US$1 billion in mobile revenue during the quarter. Our business continues to perform well, and our results reflect the strength of our ecosystem and the strong foundation we have for sustainable growth.
In addition to the earnings release this morning, the stock has been pressured by news that Chinese regulators have accused Alibaba for permitting the sale of fake goods. The report by the Chinese State Administration of Industry and Commerce said that the company allowed unlicensed merchants to sell fake products through the company's Taobao and Tmall platforms, failing to protect consumers' rights. The report was withheld until now to not interfere with the company's initial public offering in September of last year.
Two days ago, Yahoo! Inc. (YHOO) announced a plan to spin off tax free its $40 billion worth of holdings in Alibaba Group Holdings, which accounts for as much as 85 percent of Yahoo's market value. Alibaba stock is off more than ten percent since news of the Yahoo spinoff broke. The stock opened over $92 per share on the day of its initial offering and has traded as high as $120 per share. The company's stock still trades at over 50 times earnings, and could continue to sell off after investors digest the recent news.
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