Alibaba (BABA, Financial), the Chinese e-commerce firm that posted the largest initial public offering in September, reported strong sales growth in its first earnings report as a public company on November 4. The results were spectacular compared to the third quarter of 2013. After raising $25 billion in its IPO, Alibaba, which had a market capitalization of $250.94 billion after the end of trading on Monday, is now worth more than Wal-Mart (WMT, Financial) which has a market valuation of $245.81 billion. Let’s check in to find out the chief highlights of the quarter and how the stock market reacted after the results release.
The quarter number mix
For the three months ended September 30, the non-GAAP income excluding the share-based compensation expenses and amortization of intangible assets came to $1.11 billion, compared to analysts consensus estimate of $1.17 billion during the quarter. Diluted earnings were $0.20 per share, while non-GAAP diluted earnings stood at $0.45 a share, up 9% year-over-year.
Revenue rose 53.7% to $2.74 billion exhibiting the fastest growth in the past three quarters of the fiscal year. The company did make strategic moves to improve its revenue during the quarter and the investments were geared to adding on more customers and converting them into users of Alibaba’s core e-commerce business. Mobile revenue was almost ten times higher than in the similar period last year and accounted for nearly 22% of the total revenue as Alibaba continues to ramp up the money it makes through sale via mobile devices. Revenue came above the average estimate of $2.64 billion from analysts’ desk.
Gross merchandise volume (GMV) rose 48.7% year-over-year to $90.5 billion and mobile GMV accounted for 35.8% of the total, up from 14.7% in the same quarter of last year. However, profits shrank almost 18% as extraordinary charges linked to share compensation charges of $490 million around the time of the IPO did impact the bottom-line for the quarter.
Twin growth drivers
Taobao Marketplace and Tmall sites are the two pillars driving Alibaba’s success story. Taobao facilitates the sale of goods from small merchants to consumers, while on Tmall site larger companies set up their own stores to sell to huge number of customers visiting the site.
Alibaba’s chief executive, Jonathan Lu, suggested that the other growth driver remains the less developed and rural regions of China where only around 9% of the population currently uses e-commerce for shopping.
Analysts have opined that growth for Alibaba would aid in controlling costs to a certain extent which could otherwise shoot up as the company remains busy in integrating the more than dozen partnerships Alibaba forged in 2014.
Stock movement has been spectacular
Shares of the e-commerce behemoth has risen about 50% since it raised nearly $21.8 billion in the highly anticipated initial stock sale in September. The company stock moved to a record high on Tuesday after the company reported strength in the third quarter numbers. The shares rose about 2.7% to more than $104.50. This record high made investors cheer in joy, as the compared was listed in early September at $68 a share.
Last word
According to company sources, Alibaba is not so much worried about growth which it expects to slow down in the next few quarters. But it’s interested in keeping the costs down as and when investments are made in business. The quarter results were strong enough to satisfy investors. So, let’s stay tuned to the forthcoming moves of the Chinese e-commerce giant.
