Alibaba suspends advice due to COVID risks; Resilient Q4 raises stock

The Alibaba Group logo is seen at its office in Beijing, China January 5, 2021. REUTERS/Thomas Peter

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  • Fourth-quarter adjusted profit of 7.95 yuan/share vs. estimate of 7.31 yuan/share
  • Fourth-quarter revenue up 9% to 204.05 billion yuan from an estimate of 199.25 billion yuan
  • Analysts say Q4 was more resilient than expected
  • Alibaba: ‘not careful’ to give advice given COVID risks
  • Stocks climb 15% on revenue, earnings beat

May 26 (Reuters) – Alibaba Group (9988.HK) said on Thursday it would not provide a guidance for the current fiscal year as COVID-19 risks clouded its outlook, after announcing its fourth-quarter growth the slower since its IPO in 2014.

Markets, however, focused on Alibaba’s quarterly revenue and profit in a sharply declining economy and drove its shares up 15%. Analysts said results were more resilient than expected.

“As Alibaba’s large scale reflects the overall macro economy, we believe it is the primary beneficiary of a potential favorable policy rollout in terms of lockdown measures and consumer stimulus,” Daiwa analysts said. Capital in a note.

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After two months of strict COVID lockdowns that have weighed on consumer spending, Beijing this week announced measures to support the economy.

Alibaba said on Thursday the restrictions were weighing on its business by preventing merchants from shipping goods and forcing consumers to focus on buying basic necessities. The gross value of online physical goods from its retail markets in China – a key metric – fell by a small percentage of teens in April from a year earlier.

“To give you an idea of ​​the extent of the impact – based on consumer address, cities with new COVID cases in April accounted for more than half of our GMV in China retail markets. “said CEO Daniel Zhang during a post-earnings call.

While delivery services resumed in May, they were slow to fully recover due to factors including parcel backlogs, the company said.

The company’s stock had lost a third of its value this year before Thursday’s gains.

In addition to the impact of the lockdown, investors also remain nervous about the long-term prospects of Alibaba and its peers due to a regulatory crackdown on the tech industry. They were looking for signs that the worst might be over.

Earlier this month, China appeased the tech industry, saying the government supports the development of the sector and public listings of tech companies. Read more

Company executives said Thursday they believe authorities have delivered a “clear” message that they recognize the economic importance of platform companies like Alibaba.

SLOWDOWN ECONOMY

China’s giant cities have been forced into lockdown for the past two months, crippling millions of lives and prompting global companies to warn that consumers have clamped down on spending. Read more

In a sign of China’s growing concern over the fallout on growth, Premier Li Keqiang has vowed to get the world’s second-largest economy back on track.

Alibaba’s Zhang said the government has sent “important political signals” about its commitment to stabilizing the economy.

For the January-March quarter, Alibaba posted a 9% increase in revenue to 204.05 billion yuan ($30.35 billion) – the slowest pace of growth since its IPO, but ahead an average analyst estimate of 199.25 billion yuan, according to Refinitiv.

Alibaba said growing demand from Chinese business units including Tmall Supermarket and Freshippo, as well as niche shopping platforms such as Taobao Deals and Taocaiicai, helped sales.

Revenue from Alibaba’s cloud computing division rose 12%, and sales from the company’s largest core business unit rose 8% to 140.33 billion yuan.

Annual active consumers on its platforms reached about 1.31 billion for the fiscal year, including more than 1 billion consumers in China for the first time.

Ant Group, a fintech subsidiary of Alibaba, reported profit of about 22 billion yuan for the quarter ended December, up from 21.76 billion yuan a year ago. Alibaba said it received a 3.9 billion yuan dividend from Ant, the first time the fintech conglomerate has paid one.

($1 = 6.7240 Chinese Yuan)

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Reporting by Brenda Goh in Shanghai and Nivedita Balu in Bengaluru; Editing by Anil D’Silva, Tomasz Janowski and Sayantani Ghosh and Shri Navaratnam

Our standards: The Thomson Reuters Trust Principles.

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