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Alibaba management gave less optimistic sales forecasts.
STR / AFP / Getty Images Photography
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Alibaba Group Holding
(symbol: BABA) was traded down on Friday as a result of the release of its second quarter financial results.
Where we were: Alibaba is lagging behind the wider market this year, hurt by fears of a slowdown in advanced technology and the effect of tariffs on China.
Where we are headed: Analysts remain optimistic about the outlook for Alibaba despite Friday's decline.
Quarterly results are optimistic, although Alibaba offered a less optimistic outlook on sales.
The e-commerce and cloud giant said it earned $ 1.40 per share for a $ 12.4 billion business figure. Analysts were looking for a $ 1.10 EPS for a $ 12.51 billion business figure. Alibaba said that the business turnover of its main business business had jumped 56% over last year, while sales in the cloud had jumped 90%, while its media division digital and entertainment had increased 244%.
According to the newspaper, the annual number of active consumers in China's retail markets reached $ 601 million, up $ 25 million from the 12-month period ending June 30. The number of monthly mobile active users increased from 32 million to 666 million.
However, Alibaba has reduced its revenue forecast for the 2019 fiscal year, forecasting growth of between 50% and 53%, compared to its previous call of about 60%. At a teleconference, executives said its Tmall website for mainstream companies was gaining market share and that Alibaba was still seeing a total addressable market of $ 5 billion. At the same time, however, Alibaba reported weak sales of high-value items and slowing mobile phones given the limited new offerings. Consumer goods, cosmetics and clothing remained strong.
Alibaba fell 13.5% year on year. Although the company seemed to be mistaken last year, the year 2018 was different because the big tech companies generally experienced difficulties and the giants of Chinese technology were particularly affected because additional worries about the trade war and the weakness of the yuan. Alibaba's retail business is also raising fears of a slowdown by Chinese buyers, and some are worried about its future after founder Jack Ma's retirement.
Investors hoped to be more reassured by the fact that Chinese consumers continued to take the lead, but Alibaba failed to capture the effect of the macroeconomic situation.
Analysts remain optimistic: Alibaba will not be down for a long time. Rob Sanderson, of MKM Partners, reminded Alibaba of the purchase and price targets of $ 270, noting that the quarter had largely met investors' reduced expectations. According to him, lowering the sales forecast was "exactly what management should have done to manage the street", as this decision focused attention on fiscal year 2020. The title will be negotiated with its shareholders. counterparts, according to the Chinese economic indicators and developments on trade, he said, but it is "by far the best value for money among megacaps on the Internet." The potential of a bumpy ride in the short term does not take anything away from Alibaba's strong competitive position, he says.
Raymond James' Aaron Kessler reiterated a strong buy-in and a price target of $ 260, saying the results were a little under expectations, but the shortfall reflected a less certain economic environment. Growth remained strong and most investors expected a reduction in forecasts.
Alibaba was down $ 1.65 to $ 148.77 on Friday afternoon.
To make the connection
Analysts have repressed expectations due to unfavorable macroeconomic factors.
Yet, many still believe in Bull's long-term history for Alibaba and its peers.
Write to Teresa Rivas at [email protected]
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