Facebook
Twitter
In a way, Alibaba Group (NASDAQ: BABA) is a tale of two companies. On one hand, the company has a phenomenal story: It’s an e-commerce giant located in China, and as such as huge exposure to a booming industry and one of the fastest-growing economies on the planet.
On the other hand, investors have begun to doubt the company’s future growth prospects. Economic growth in China has slowed down considerably this year, which has weighed heavily on Alibaba. The stock is down 3% year-to-date.
As a result, the latest Alibaba earnings report was a very important one for the company. It needed to prove that its growth was still on track in order to win over analysts and investors once again.
Fortunately, it did just that. In the Alibaba earnings report, the company said it beat revenue expectations soundly. Alibaba stock soared 5% at the market open Thursday and finished the day up 4%.
Alibaba Revenue Surge
Alibaba reported fiscal fourth-quarter profit of $832 million. On a per-share basis, it earned $0.33 per share. When excluding one-time factors not expected to recur going forward, earnings came out to $0.47 per share.
Earnings missed forecasts ̶ analysts expected $0.60 per share ̶ but revenue came in well above estimates. Alibaba generated $3.75 billion of revenue last quarter, which was above the $3.59 billion projected.
From a year-over-year perspective, the company posted excellent growth rates. Revenue was up 39% from the same quarter last year. Diluted earnings per share as adjusted jumped 20% in the full fiscal year.
Monthly Active Users Soar to 410 Million
One of the key growth drivers in Internet retail right now is mobile, and fortunately Alibaba is seeing great results in that area.
Alibaba ended the quarter with 410 million monthly active users, up 42% from the same point last year.
The growth was due primarily to increased adoption among users on mobile devices as the primary method of using the service. This is huge growth, and as Alibaba accrues active users, it is increasingly monetizing on new platforms, including mobile and cloud.
Revenue for Alibaba’s cloud computing and Internet infrastructure business soared 175% year-over-year. Alibaba’s cloud platform, AliCloud, had over 2.3 million customers last quarter. This is likely to only grow from here. Last quarter, AliCloud launched 612 new features and services and 22 new products.
It is hugely important for Alibaba to demonstrate it can convert user activity to mobile, and it is doing that very effectively. Last quarter, 71% of Alibaba’s China commerce retail revenue was mobile, up from 40% at the same point last year.
This indicates Alibaba’s efforts to convert users to its mobile and cloud apps like Mobile Taobao App, which is a great sign.
Are Growth Worries in the Past?
The big concern surrounding Alibaba earnings was whether it could reignite revenue growth, which seemed far from certain considering the difficult macro-economic climate.
But the Alibaba earnings report put these concerns to rest. Alibaba’s 39% total revenue growth rate is the highest over the past four quarters, and it was a significant acceleration from the previous quarter. It has now racked up several consecutive quarters of growth in both revenue per active buyer and revenue per mobile monthly active user.
Alibaba is displaying some similar growth strategies to Amazon.com (NASDAQ: AMZN), in the sense that it is betting a great deal on cloud computing and consumer engagement.
One lingering weakness for Alibaba is that it has not succeeded much in taking its platform global thus far. To date, it’s primarily confined to China, although a company could do worse than operate a highly profitable business with high margins, dominating a country with an emerging middle class and a population exceeding 1 billion.
There is no guarantee that Alibaba will be the next Amazon, but if it can come even close, investors could do extremely well in the stock.
Warren Buffett’s Big Secret
Warren Buffett didn’t become the world’s richest investor by accident. He did it by investing in a certain kind of stock. Few realize what separates this kind of stock from 99% of equities. But once you do, you’ll never invest the same way again. Discover Buffett’s big secret right here.