alibaba earnings

Alibaba (NYSE: BABA) stock popped yesterday despite posting mixed earnings for the September quarter. The company increased its stock buyback and also sounded optimistic about the reopening in China which helped buoy sentiments.

Alibaba reported revenues of $29.1 billion in the quarter which was up 3% YoY. While the sales growth improved from the previous quarter when the Chinese e-commerce giant reported its first YoY fall in revenues, it was nonetheless amongst the slowest growth that it has witnessed. The revenues also fell short of what analysts were expecting.

Terming the revenue growth “healthy”, Tony Xu, Alibaba’s CFO said, that the growth came “in spite of the impact on consumption demand by the COVID-19 resurgence in China as well as slowing cross border commerce due to increasing logistics costs and foreign currency volatility.”

Retail Spending Has Slowed Down amid High Inflation & Slowing Economy

Notably, retail spending, especially on discretionary goods has been quite tepid even in the US. While Walmart posted strong revenue growth in the most recent quarter, thanks to the higher share of groceries in its sales mix, rival Target disappointed markets with its earnings and guidance. Target has much higher sales of discretionary products in its sales mix.

Amazon also missed earnings estimates in the third quarter and also provided dismal guidance for the fourth quarter, projecting sales growth of between 2-8%, which was below what analysts were expecting.

Amazon stock slumped after its Q3 2022 earnings release. Several analysts lowered their target price on the stock but overall, Wall Street is overwhelmingly bullish on the stock. We have a guide on how beginners can buy Amazon stock.

Retail spending has slowed down amid high inflation and a slowing economy. Chinese GDP growth is also languishing near multi-decade lows. Not many believe that the country would be able to achieve its targeted GDP growth of 5.5% this year.

Notably, Alibaba did not release the sales numbers for its Singles Day held earlier this month. It only said that sales were similar to the previous year.

Alibaba Posted Better Than Expected Operating Income in the September Quarter

Alibaba posted an operating income of $3.53 billion in the September quarter which was 68% higher YoY. The metric was better than what analysts were expecting. It however posted a net loss of $3.15 billion.

BABA said that the losses were “primarily attributable to an increase in net losses arising from the decrease in market prices of our equity investments in publicly-traded companies and a decrease in share of results of equity method investees.”

The company’s CEO Daniel Zhang pointed to the various headwinds that Alibaba is facing. He said, “The ongoing resurgence of Covid-19, geopolitical tension, inflation, and currency depreciation—the convergence of all these forces has created considerable difficulties for business operations.”

Alibaba Stock Popped on Higher Buybacks, Reopening Optimism

Meanwhile, Alibaba stock popped yesterday despite mixed earnings. It increased the size of its stock buybacks by $15 billion. The company has a $25 billion stock buyback in place out of which it has already exhausted $16 billion.

Companies usually buy back their shares when they find their stocks undervalued. We have a guide on how investors can buy cheap stocks like Alibaba.

Alibaba also sounded bullish on the reopening in China. Zhang said, “With the introduction of the 20-point pandemic measures from the state authorities, that can be expected to have a positive impact. We certainly do note still some disruption to logistics in certain regions of the country.” He emphasized, “But overall, we do expect things to continue to improve in a positive direction.”

Notably, China still has a zero-COVID policy which has triggered protests in many parts of the country, a rarity in the Communist country.

During the earnings call, Zhang said, “We believe that Covid will ultimately pass, that our society, our economy, and our lives will eventually return to normal, and that the massive potential of China as the world’s second-largest economy will be further unleashed.”

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