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Alibaba (BABA) Surpasses Q4 Earnings & Revenue Estimates

Zacks Equity Research

Alibaba Group Holding Limited BABA reported fourth-quarter fiscal 2020 (ended Mar 31, 2020) earnings of $1.30 per ADS, surpassing the Zacks Consensus Estimate of 88 cents. Also, the bottom line increased 7% year over year.

It reported revenues of RMB114.3 billion (US$16.1 billion), up 22% from the prior-year quarter. The year-over-year revenue increase was driven by strength in the company’s China commerce retail business and cloud computing.

Also, revenues surpassed the Zacks Consensus Estimate of US$15.28 billion.

However, the company expects revenue growth to be slower this year on account of post-COVID-19 economic uncertainties and disruption of business owing to U.S.-China tensions.

Alibaba Group Holding Limited Price, Consensus and EPS Surprise

 

Alibaba Group Holding Limited Price, Consensus and EPS Surprise

Alibaba Group Holding Limited price-consensus-eps-surprise-chart | Alibaba Group Holding Limited Quote

Revenues by Segments

Alibaba has four reportable segments — Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives. The details of these segments are discussed below.

Core Commerce: This segment comprises marketplaces operating in retail and wholesale commerce in China, as well as international commerce. The segment’s revenues in the quarter totaled RMB93.9 billion (US$13.3 billion), reflecting an increase of 19% on a year-over-year basis.

China commerce retail business (62% of total revenues) The business vertical’s revenues in the quarter were RMB70.9 billion (US$10 billion), reflecting an increase of 21% year over year.

China commerce wholesale business (3% of total revenues) — This business generated revenues of RMB2.8 billion (US$394 million), reflecting a 9% increase from the year-ago quarter. This was due to an increase in revenues from Lingshoutong, a digital sourcing platform that connects FMCG brand manufacturers and their distributors directly to local mom-and-pop stores in China. In addition, increase in average revenues from paying members on 1688.com aided revenue growth.

International commerce retail business (8% of total revenues) — Revenues in the quarter were RMB5.4 billion (US$756 million), increasing 8% year over year. The increase was driven by revenue growth from AliExpress and Lazada.

International commerce wholesale business (2% of total revenues) — This business generated revenues of RMB2.46 billion (US$347 million), increasing 15% from the prior-year quarter. The growth was due to an increase in the number of paying members on the alibaba.com platform.

Cainiao logistics services (4% of total revenues) — This business generated revenues of RMB4.95 billion (US$699 million), up 28% year over year. The segment represents revenues from growing cross-border and international commerce retail businesses.

Local consumer services (4% of total revenues) — This business generated revenues of RMB4.8 billion (US$684 million), decreasing 8% year over year

Others business (2% of total revenues) — The business generated revenues of RMB2.6 billion (US$362 million), reflecting a 51% year-over-year increase.

Cloud Computing: This segment comprises Alibaba Cloud that offers a complete suite of cloud services. Revenues in the quarter were RMB12.2 billion (US$1.73 billion), up 58% from the year-ago quarter, driven by increased revenue contribution from both public cloud and hybrid cloud businesses.

Digital Media and Entertainment: The segment operates businesses through media properties that include UCWeb, Youku Tudou, OTT TV service, Alibaba Music and Alibaba Sports. Revenues from the segment were RMB5.9 billion (US$840 million), reflecting an increase of 5% on a year-over-year basis.

Innovation Initiatives and Others: This segment includes businesses such as the YunOS operating system, AutoNavi, DingTalk enterprise messaging and others. Revenues in the quarter were RMB2.3 billion (US$323 million), up 90% year over year. This was driven by an increase in revenues from online games and other business initiatives.

Key Metrics

Mobile Monthly Active Users (MAUs) — Mobile MAUs were 846 million, improving 17.3% from the prior-year quarter and 2.7% sequentially. This improvement was caused by an increase in the adoption of mobile devices by consumers as the primary method of accessing Alibaba’s platforms. 

Annual Active Consumers— China retail marketplaces had 726 million annual active buyers, reflecting 11% year-over-year growth and 2.1% sequential improvement.

Operating Results

Alibaba’s operating expenses (product development + sales and marketing + general and administrative) of RMB30.6 billion increased 18.2% from a year ago.

Operating margin was 6%, down 300 basis points year over year.

Adjusted EBITDA increased 1% year over year to RMB25.4 billion (US$3.6 billion).

Cash Flow/Share Repurchase

Net cash flow from operations was RMB2.16 billion (US$306 million) and free cash flow was an outflow of RMB4.2 billion (US$595 million) in the fiscal fourth quarter.

Zacks Rank & Key Picks

Alibaba currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Wayfair Inc. W, eBay EBAY and Inphi Corporation IPHI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Wayfair, Inuvo, and Inphi is currently projected at 23%, 12.4% and 37.7%, respectively.

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