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ALIBABA GROUP HOLDING

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Stock Loss Torpedoes Earnings At Alibaba -- WSJ

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05/23/2020 | 02:48am EDT

By Liza Lin and Allison Prang

Alibaba Group Holding Ltd.'s fourth quarter profit fell 88% from the same period a year ago after the coronavirus pandemic affected the value of the Chinese e-commerce giant's public investments.

Alibaba, China's most valuable technology company, reported net income of 3.16 billion yuan ($447 million) for the quarter ended in March. The decline was mainly because of a net investment loss of $1.09 billion as the pandemic weighed on stock markets and dented the value of Alibaba's equity investments, the company said Friday. A year earlier, Alibaba had a net investment gain.

Even so, the spending power of Chinese consumers remained strong. Revenue rose 22% to 114.31 billion yuan, exceeding the expectations of analysts polled by FactSet. Alibaba's revenues mostly come from ad sales and selling other services to third-party merchants on its platform. China commerce retail sales grew 21% from a year ago.

More consumers began buying fresh food and groceries online, with city lockdowns forcing people to cook at home, Daniel Zhang, Alibaba's chairman and chief executive officer told investors. Still, other categories such as apparel and makeup fell, as most people wore face masks and stayed home, he added.

Alibaba -- which runs China's two most popular e-commerce platforms -- started to see a recovery in those platforms beginning March as the country returned to normalcy quickly with the government's rapidly-introduced virus control measures, Chief Financial Officer Maggie Wu said.

Its businesses have been steadily recovering and in April, transaction volumes and user activity in Alibaba's China retail businesses returned to levels seen in the October-December quarter, she said.

The Hangzhou-based company said it expects revenue to top 650 billion yuan this fiscal year.

When the coronavirus first broke out in late January, Alibaba had warned investors that the virus would hurt the company in the short run.

Uncertainties still exist, Ms. Wu said, as countries around the world face fallout from the pandemic and there is little clarity on the speed of a global economic recovery. Geopolitical issues between the U.S. and China also weigh on the economy, she added.

Alibaba's earnings results will likely be closely monitored by major retailers globally, as they assess the impact of the coronavirus on their own sales and watch for the speed of recovery.

Earnings per American depositary share were 1.16 yuan a share compared with 9.84 yuan a share a year earlier. On an adjusted basis, earnings per ADS were 9.20 yuan, versus analysts' expectations of 6.05 yuan a share.

Sales in the company's cloud computing business grew 58% from a year ago, while digital media and entertainment segment revenue for the March quarter rose 5%.

On Friday's investor call, Ms. Wu also addressed a bill passed by the U.S. Senate on Wednesday that might force Chinese companies such as Alibaba and Baidu Inc. to give up their U.S. listings. American regulators say China has often been unwilling to allow access to audit records sought by an oversight board, making it hard for them to assess the credibility of many Chinese firms listed in the U.S.

Ms. Wu said the company was "closely watching the developments," and that Chinese and U.S. securities regulators and the oversight board were already in talks.

Corrections & Amplifications Alibaba posted a net investment loss of $1.09 billion for its latest quarter. An earlier version of this article incorrectly reported the investment loss as $1.09 million. (Corrected on May 22.)

Write to Liza Lin at Liza.Lin@wsj.com and Allison Prang at allison.prang@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
ALIBABA GROUP HOLDING 0.69% 219.55 Delayed Quote.3.51%
BAIDU, INC. 4.90% 114.4 Delayed Quote.-9.49%
SUN ART RETAIL GROUP LIMITED -1.75% 11.22 End-of-day quote.18.73%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) -0.55% 7.0681 Delayed Quote.2.09%
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Financials
Sales 2020 504 B 71 150 M 71 150 M
Net income 2020 148 B 20 904 M 20 904 M
Net cash 2020 288 B 40 633 M 40 633 M
P/E ratio 2020 28,2x
Yield 2020 -
Capitalization 4 172 B 589 B 589 B
EV / Sales 2019
EV / Sales 2020 7,71x
Nbr of Employees 117 600
Free-Float 66,4%
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Last Close Price 1 554,41 CNY
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NameTitle
Yong Zhang Executive Chairman & Chief Executive Officer
John Michael Evans President & Director
Wei Wu CFO & Head-Strategic Investments
Chung Hsin Tsai Executive Vice Chairman
Yun Ma Director
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