ii view: Alibaba sales up 42%

Online Chinese retailer Alibaba beats analysts’ forecasts as active users rise to 674 million. 

Second-quarter results

• Revenue rose by 42% to US $16.7 billion
• Adjusted earnings (EBITDA) up 34% to $5.7 billion
• Annual active consumers on its China retail marketplaces reached 674 million, up 20 million 

Chief Executive Daniel Zhang said:

"Alibaba had a great quarter, expanding our user base to 674 million annual active consumers, demonstrating our superior user experience. We will continue to expand our customer base, increase operating efficiency and deliver robust growth. With strong cash flow from our core commerce business, we will continue to invest in technology and bring digital transformation to millions of businesses globally."

ii round-up:

Alibaba Group Holding Ltd ADR (NYSE:BABA) was founded by 18 people led by Jack Ma back in April 1999. 

Today the New York-listed Chinese tech giant employs over 100,000 staff and has a stock market value of over $400 billion. 

It operates China's most popular online marketplaces such as Taobao (C2C), and Tmall (B2C). 

Business is conducted across the four divisions of Core Commerce, by far the biggest revenue generator, Cloud Computing, Digital Media and Entertainment and Innovation initiatives. 

The company reported second quarter results which beat analyst forecasts.  

Both revenues and earnings exceeded analysts’ estimates, although revenue growth of 42% was down on the 61% seen in the second-quarter 2018. 

Core commerce sales rose by 44%, helped along by food delivery business Ele.me, while its Cloud Computing business reported revenues of $1.1 billion, a jump of 66%. 

The share price gained by over 3% in pre-market trading.  

ii view:

Arguably a Chinese vision of US online retailing giant Amazon.com Inc (NASDAQ:AMZN), Alibaba has made huge progress in its 20-year history. A new chapter for the company is soon to commence as founder Jack Ma hands over the reins as chairman to current chief executive Daniel Zhang. This comes within a broader reshuffle and change of the group’s management. 

For investors, exposure to consumers in the world’s second biggest economy is an enticing prospect. A forward price earnings ratio of under 30 and below the three-year average offers appeal. But concerns regarding the health of the Chinese economy and broader US China political strains also need to be remembered.  

Positives

• Exposure to the world’s second biggest economy
• Looking to grow sales outside of China
• Undertaking an efficiency drive to reduce costs

Negatives

• Sales growth slowed compared to the second-quarter 2018
• Cloud computing is loss making
• Major company Tencent also competes in the cloud computing arena

The average rating of stock market analysts:

Strong buy