Alibaba Shares Slump After Lackluster Earnings

By Tracy Qu

Alibaba Group shares dropped as investors weighed a muted quarterly performance and signs of rising competition against fresh plans for buybacks.

Shares of the Chinese e-commerce giant were 6.8% lower in Hong Kong at midday on Thursday after its U.S.-listed ADRs slid nearly 6% overnight. Its Hong Kong-listed shares, down 33% over the past 12 months, have shed almost 8% in the new year.

Alibaba said late Wednesday that revenue in its third quarter rose 5.0% from a year earlier to 260.35 billion yuan, just short of expectations for CNY261.34 billion ($36.40 billion) in a FactSet poll of analysts but beating the top-line figures from the two preceding quarters.

Net profit for the quarter ended December fell 69% to CNY14.43 billion, missing expectations for CNY36.99 billion in a FactSet poll as the company booked mark-to-market changes on equity investments and heavy impairments related to retail business Sun Art and video-streaming platform Youku. Non-GAAP net income, which excludes mark-to-market changes in equity investments, impairments and share-based compensation expenses, among others, came in 4% lower at about CNY48 billion.

The company also said it approved a $25 billion boost to its share buyback program through March 2027.

Sales at Alibaba, one of China's largest companies by market cap, have been growing in the single digits recently amid an economic slowdown in the country and the rise of smaller rivals. Chinese e-commerce company PDD Holdings posted 94% top-line growth in the September quarter. Citi analysts led by Alicia Yap described Alibaba's results as "relatively in-line-ish," highlighting "slightly soft" revenue and focusing on non-GAAP income that was helped by higher gross profit margin and lower research-and-development expenses.

They also noted the company's investment plans to drive growth and market-share gains. "While we applaud the proactive defending approach to strengthen market position," the analysts wrote in a research note, "with intensified competition and challenging macro headwinds, any possible share gains are likely to take time." Citi kept a buy rating on Alibaba, citing its undemanding valuation.

Shawn Yang, a senior research analyst at Arete Research Asia, said that although overall results were in line, the growth of Alibaba's core e-commerce and cloud businesses appears muted. Revenue from the company's Taobao and Tmall Group and cloud-computing unit rose 1.6% and 2.6%, respectively.

"Shares buyback is, of course, a good move, but [investors] also care about the fundamentals of the business," Yang said. "Sometimes, the latter is even more important."

Write to Tracy Qu at tracy.qu@wsj.com

(END) Dow Jones Newswires

February 08, 2024 00:08 ET (05:08 GMT)

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