Alibaba Group (BABA) Shares Higher on Earnings Beat

Shares of the Alibaba Group Holdings Ltd (BABA) were trading up +2.26 or +3.25 percent to $71.80 in Thursday’s premarket after the company reported better than expected earnings and revenue in the company’s latest quarter. Alibaba stock closed at $69.54, down -0.23 or -0.33 percent in Wednesday’s regular trading session.

Hangzhou, China based Alibaba Group Holding Ltd is a network of internet e-commerce and business to business websites and web portals.
The company has a payment and escrow service called Alipay which accounts for as much as half of all online payments in China, as well as a shopping search engine and cloud computing services. The company, founded in an apartment by Jack Ma, became a group in 1999, when the website was formed as a business to business portal connecting Chinese manufacturers to foreign buyers. Alibaba went public at $68 per share back in September of 2014, in the world’s largest initial public offering ever raising $25 billion for the company.

The company reported earnings per share of $1.92 billion, or $0.76 per share in the quarter ended on December 31st, 2015, more than double the results of the same period one year ago. After the exclusion of certain onetime items, the company earned $0.99 in the quarter. Revenue increased +32 percent to $5.33 billion. The analyst consensus was for the company to report $0.89 per share on $5.11 billion in revenue.

Alibaba reported mobile monthly active users had jumped +48 percent to 393 million in the quarter, which accounted for an increase of +192 percent in its mobile revenue. Also, the company reported 407 million annual active buyers, an increase of +22 percent year on year. The quarterly results were fueled by the company’s performance during “Singles Day”, a Chinese online shopping festival held in November, Alibaba’s sales increased +54 percent during the event.

Daniel Zhang, Chief Executive Officer of Alibaba Group said in a statement, “Alibaba Group had an outstanding quarter, reaching a milestone of over 400 million annual active buyers and continuing our unrivaled leadership in mobile. Our proven ability to deliver an unparalleled consumer experience and to help merchants attract, engage and retain buyers will drive future growth in our core business. We remain focused on our top strategic priorities, including global imports, rural expansion, increasing our footprint in first-tier Chinese cities and building a world-class cloud computing business.”

As the company’s user base increased, Alibaba was able to increase its monetization rate. Despite a slowdown in growth in the Chinese retail marketplace from the previous two quarters, the monetization/take rate increased to 2.98 percent compared to 2.7 percent one year ago. The mobile monetization rate surged from 1.96 percent to 2.88 percent.

In a related note, Alibaba has agreed on the sale of its stake in online to offline start-up Meituan-Dianping for approximately $900 million. Alibaba stock has had a rough year, declining by 15 percent through yesterday’s close, and just above its IPO price. With this morning’s earnings results, Alibaba stock could be ready to turn around.

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Alibaba Exits Meituan-Dianping In $900 Million Deal: WSJ

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Published on Jan 28, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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