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Alibaba Raises Guidance at Investor Day, Shares Soar
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Alibaba’s (BABA - Free Report) investor day is a two-day affair and day one brought a revision to the annual revenue guidance that sent share prices up over 13%.
Company executives talked up revenue growth prospects through ecommerce, cloud, digital media and entertainment, and of course international expansion. All this will generate revenue growth of around 45-49%, or over $34 billion in revenue this year, according to CFO Maggie Wu.
CEO Daniel Zhang also said that the gross merchandise volume (GMV) would double in the next three years from $547 billion in fiscal 2017 to $1 trillion by 2020.
Alibaba’s revenue growth has been constant since its Sep 2014 IPO with some acceleration last year. That was driven in part by the best-ever March quarter, which is Alibaba’s fourth quarter. Despite the sequential decline in the seasonally softer quarter, year on year growth was a record 59.5%.
Current estimates for the June and September quarters imply a growth rate of around 33% while the estimate for the current fiscal year (2018) is a bit lower at around 31%. So this guidance will definitely lead to revenue estimate revisions.
But will it percolate down to the bottom line?
Let’s see. While revenue growth was very strong in the last quarter, it came on the back of higher business expansion, logistics and other costs, as well as a spike in taxes. So profits declined on a GAAP basis. But after x-ing out stuff like intangible assets amortization, disposals/deemed disposals/revaluation of investments and gains from restructuring commercial arrangements with Ant Financial, earnings were actually up 95%.
For the year, Alibaba grew COGS 62% and opex 25%, which more or less offset the 48% increase in revenue. But here again there were a number of one-time items adjusting for which there was a 59% increase in profit.
Very high one-time costs are something to watch with skepticism since management may be tempted to couch quarterly expenses here. But given Alibaba’s market position, customer clout, revenue growth trend, the increasing per capita GDP of Chinese customers and a secular trend of increasing consumerism in China, it isn’t unreasonable to conclude that we are safe as far as this stock is concerned.
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
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Alibaba Raises Guidance at Investor Day, Shares Soar
Alibaba’s (BABA - Free Report) investor day is a two-day affair and day one brought a revision to the annual revenue guidance that sent share prices up over 13%.
Company executives talked up revenue growth prospects through ecommerce, cloud, digital media and entertainment, and of course international expansion. All this will generate revenue growth of around 45-49%, or over $34 billion in revenue this year, according to CFO Maggie Wu.
CEO Daniel Zhang also said that the gross merchandise volume (GMV) would double in the next three years from $547 billion in fiscal 2017 to $1 trillion by 2020.
Alibaba’s revenue growth has been constant since its Sep 2014 IPO with some acceleration last year. That was driven in part by the best-ever March quarter, which is Alibaba’s fourth quarter. Despite the sequential decline in the seasonally softer quarter, year on year growth was a record 59.5%.
Current estimates for the June and September quarters imply a growth rate of around 33% while the estimate for the current fiscal year (2018) is a bit lower at around 31%. So this guidance will definitely lead to revenue estimate revisions.
But will it percolate down to the bottom line?
Let’s see. While revenue growth was very strong in the last quarter, it came on the back of higher business expansion, logistics and other costs, as well as a spike in taxes. So profits declined on a GAAP basis. But after x-ing out stuff like intangible assets amortization, disposals/deemed disposals/revaluation of investments and gains from restructuring commercial arrangements with Ant Financial, earnings were actually up 95%.
For the year, Alibaba grew COGS 62% and opex 25%, which more or less offset the 48% increase in revenue. But here again there were a number of one-time items adjusting for which there was a 59% increase in profit.
Very high one-time costs are something to watch with skepticism since management may be tempted to couch quarterly expenses here. But given Alibaba’s market position, customer clout, revenue growth trend, the increasing per capita GDP of Chinese customers and a secular trend of increasing consumerism in China, it isn’t unreasonable to conclude that we are safe as far as this stock is concerned.
Alibaba shares carry a Zacks Rank #3 (Hold). But the sector is particularly ripe for the picking with a large number of stocks sporting a buy rating. So you choose from Autobytel , JD.com (JD - Free Report) , Mercadolibre (MELI - Free Report) , or PetMed Express (PETS - Free Report) , all of which carry a Zacks Rank #1 (Strong Buy). You can also consider the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>