Alibaba tipped to record solid quarterly revenue growth
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Alibaba Group Holding, the world’s largest e-commerce company, is expected to report another strong quarter of sales in the three months to September 30, as its preparations intensify for the Singles’ Day online shopping festival next week.
Analysts estimated New York-listed Alibaba’s total second-quarter revenue for its fiscal year that ends March would increase about 50 per cent year on year.
“We model total revenue to grow 51.7 per cent to 33.64 billion yuan (HK$38.55 billion) versus [market analysts’] consensus estimate of 33.94 billion yuan,” Alicia Yap, the head of regional internet research at Citi Research, said in a report published ahead of Alibaba’s earnings announcement on Wednesday.
Yap estimated Alibaba’s gross merchandise volume, the total amount of goods sold through the company’s vast online retail platforms, to have grown 22 per cent year on year to 872 billion yuan in the past quarter.
Citi maintains a “buy” rating on Alibaba shares, and has raised its target price to US$133, up from the previous US$112.
In an open letter to shareholders early this month, Alibaba chief executive Daniel Zhang Yong said: “During fiscal year 2016, our China retail marketplaces reached a historical milestone when annual gross merchandise volume transaction surpassed 3 trillion yuan, making Alibaba Group the largest retail ecosystem in the world.”
In the three months to June, Alibaba reported a 59 per cent year on year jump in revenue to 32.15 billion yuan. The gross merchandise volume transacted on its China retail platforms rose 24 per cent to 837 billion yuan.
Alibaba, which owns the South China Morning Post, runs four business segments – core commerce, cloud computing, digital media and entertainment, and innovation initiatives.
Citi estimated Alibaba’s revenue from its core commerce business would reach 28.18 billion yuan in the quarter to September, up from 27.24 billion yuan in the quarter to June.
That segment comprises the China and international online marketplaces operating in retail and wholesale commerce, including Taobao Marketplace, Tmall.com, Juhuasuan, 1688.com, AliExpress and Lazada.
“Citi maintains a “buy” rating on Alibaba shares, and has raised its target price to US$133, up from the previous US$112.”
Citi predicted Alibaba’s cloud computing revenue would reach 1.56 billion yuan in the three months to September. Led by subsidiary Alibaba Cloud, it had revenue of 1.24 billion yuan in the quarter to June.
Digital media and entertainment revenue was estimated by Citi to have reached 3.35 billion yuan in the past quarter. This segment, which includes UCWeb and Youku Tudou, had revenue of 3.13 billion yuan in the June quarter
Alibaba’s innovation initiatives segment was forecast by Citi to have posted revenue of 550 million yuan in the three months to September, compared with 535 million yuan in the June quarter. This segment includes the YunOS mobile operating system and web mapping and navigation software AutoNavi.
We want to offer a large variety of daily necessities to the city’s consumers
Daniel Zhang Yong, Alibaba chief executive
Last week, Alibaba said its introduction of the Singles’ Day shopping extravaganza and the Tmall.hk platform to Hong Kong would ramp up e-commerce services outside the mainland.
“We want to offer a large variety of daily necessities to the city’s consumers,” Zhang said at the launch of Alibaba’s 11.11 Global Shopping Festival in Hong Kong.
That kicked off a flurry of activities ahead of Singles’ Day, an annual event held on November 11 that will see billions of dollars of goods transacted on Alibaba’s online retail platforms within 24 hours, making it the world’s biggest online shopping event.
At last year’s 11.11 festival, Alibaba posted a 60 per cent year on year increase in gross merchandise volume to 91.2 billion yuan.
Daiwa Capital Markets analyst John Choi said in a report that sentiment on Alibaba was positive as “most investors now seem to have a better understanding of Alibaba’s ecosystem”. Daiwa has a “buy” rating on Alibaba.
Questions & Answers
Q.Which business segments does Alibaba operate in?
Which business segments does Alibaba operate in?
Alibaba runs four business segments: core commerce, cloud computing, digital media and entertainment, and innovation initiatives. These encompass China and international online marketplaces, as well as mobile operating systems and web mapping software.
Q.How much revenue is predicted for Alibaba's core commerce business?
How much revenue is predicted for Alibaba's core commerce business?
Citi estimated Alibaba’s core commerce business revenue would reach 28.18 billion yuan in the quarter to September. This is an increase from 27.24 billion yuan reported in the previous quarter to June.
Q.What is Singles' Day and when does it take place?
What is Singles' Day and when does it take place?
Singles' Day is an annual online shopping event held on November 11. It sees billions of dollars of goods transacted on Alibaba's platforms, making it the world's biggest online shopping event.
Q.What was the estimated total gross merchandise volume for the past quarter?
What was the estimated total gross merchandise volume for the past quarter?
Alicia Yap of Citi Research estimated Alibaba's gross merchandise volume grew 22 per cent year on year to 872 billion yuan in the past quarter. This represents the total value of goods sold through its online platforms.
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