Alibaba Downsizes Forecast Amid Slowed E-commerce, Trade War Fears
Shares in Asia's e-commerce giant fell more than 1 percent Friday after the company posted lower-than-expected results and guidance amid economic uncertainty.
The stock of Asia's top e-commerce company, Alibaba (NYSE: BABA), was trading down $2.24 per share by Friday afternoon in New York after the giant posted its financial results for the third quarter showing lower-than-expected sales growth and a downsized full-year guidance.
In a statement Friday, Alibaba Group Holding Ltd., based in Hangzhou, lowered its outlook for the year by 4 to 6 percent to the range of between 375 billion yuan and 383 billion yuan ($54.4 billion to $55.6 billion) as uncertainties loom amid a U.S.-China trade war.
The guidance, below the consensus of 395.75 billion yuan, coupled with Alibaba's lower-than-expected revenue of $12.4 billion for the three months through September, sent the shares in the company down more than 1 percent to $149.04 per American depositary share intraday.
Shares in Alibaba fell $2.24 intraday Friday to $149.04 apiece.
(Source: Thomson Reuters Eikon)
Compared with the same period a year ago, its total revenue increased 54 percent, the company said. Its core commerce business generated $10.6 billion, a 56 percent gain year-over-year, while its digital media and entertainment, cloud computing, and innovation businesses rose 24, 90, and 20 percent, respectively.
The company said its retail marketplace had 601 million annual active consumers in the 12-month period through September. The number of mobile monthly average users reached 666 million in September, 32 million more than in June.
Net income was $2.7 billion, an increase of 5 percent from the same period last year, Alibaba reported. Earnings per share were $1.11.
"Alibaba had another strong quarter of rapid growth," Daniel Zhang, the chief executive officer of Alibaba, said in a statement Friday. "Under our New Retail strategy, we are realizing our vision to enable renewed growth for traditional retailers through digitizing their store-based operations, powered by Alibaba's technology and consumer insights."
The company has been investing heavily in offline retail and rural e-commerce in a bid to win new customers as China's urban market shows signs of saturation.
In a call with analysts on Friday, company executives said big-ticket purchases could be affected by economic uncertainty and that they will delay efforts to make more money on some aspects of its marketplaces in an effort to retain businesses on its platform.
"In light of current fluid macro-economic conditions, we have recently decided not to monetize, in the near term, incremental inventory generated from growing users and engagement on our China retail marketplaces," Alibaba said today.
The decision to take in less income from its platforms comes ahead of Singles' Day, Alibaba's annual mega-sale event, which peaks on 11/11 (Nov. 11) and last year netted the company over $25 billion in sales.
Alibaba competes fiercely for customers and merchants during the event and has historically recorded much higher marketing costs around the time, which also eats into sales from the first and third quarter.
Ahead of the event, sales growth on the company's China retail marketplaces in the third quarter slowed to 37 percent, its weakest growth rate in eleven quarters.
Analysts said the impact of trade tensions and tighter regulation in China, including new rules on advertising and online finance, will continue to weigh on the company's share price for some time.
"China macro uncertainty has been driving stock price performance for the group as a whole since mid-June. We think this will need to reconcile before there is a sustainable improvement in sentiment," Rob Sanderson, senior research analyst and managing director at MKM Partners, said in a note ahead of the earnings.
At a recent event, Chairman Jack Ma predicted the trade war could last 20 years and said the company would adapt plans, including scrapping an initiative to create a million jobs in the United States by bringing U.S. producers onto the platform.
Ma said Alibaba was still confident of reaching its goal of 2 billion customers globally by 2036 however, as it continues to build on big-ticket investments in Southeast Asian e-commerce, global cloud services, and projects to reach more buyers outside big cities.
(Reuters contributed to this article)