Alibaba Manages to Beat Estimates Despite China Economy Slowdown

08:56 02/03/2019

Shares of e-commerce Chinese company Alibaba were jumping over 6% after the company reported quarterly results for the December quarter.

Despite quarterly revenue growing at its slowest pace since 2016, the second most valuable public company in Asia after Tencent, still beat estimates and saw gross merchandise volume (GMV), a key metric, grow at a solid 29 percent.

Wall Street was concerned over how Chinese's economic slow down and the U.S. Chinese trade war would affect the company.

Net income for the quarter saw a jump of 37 percent to 33.1 billion yuan. This was better than the 22.1 billion yuan that had been expected. Adjusted earnings-per-share was 12.2 yuan compared with11.2 yuan projected.

Revenue also saw a jump of 41 percent to 117.3 billion yuan, but it was the slowest growth in over two years for the company. It was also behind the 119.4 billion yuan expected.

“In the future, obsessing on the rate of growth is not meaningful because of the law of large numbers. The reality is the absolute dollar amount of new wealth creation in the Chinese economy will be well over USD 800 billion each year,” remarked Alibaba's co-founder Joe Tsai to analysts on Wednesday.

“We have witnessed the government becoming more adept at calibrating the interplay between regulation and economic growth,” Tsai said. "The bigger point here is that the Chinese government is now getting quite sophisticated in terms of targeting the government measures more towards fiscal policy."

“Concerns about trade tensions might affect sentiment, but Alibaba’s exposure to the tangible effects of trade tariffs is small,” Tsai also said.

“For our businesses in e-commerce, consumer services, entertainment and cloud computing, the primary growth driver is not exports but domestic consumption and corporate transformation.”

“While the Chinese economy suggests a bleaker outlook in 2019, the company continues to grow its user base at a healthy rate and is working on monetizing new ad revenue streams, which should keep driving growth in the coming year,” eMarketer forecasting analyst Oscar Orozco remarked.

"The market might view this as the end of the adjustment period and the worst is behind us, and send shares up,” said Eric Wen, founder and CEO of Blue Lotus Capital Advisors.

“E-commerce active customer growth is good, mobile monthly active users of e-commerce app is good, but profitability was pretty bad as expected.”0

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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