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Alibaba’s Audacious Goal To Reach $1 Trillion In Merchandise Sales

Alibaba ( BABA ) says it’s on a path to realizing its vision of achieving $1 trillion in gross merchandise volume in about four years, as it also pursues a goal of reaching 2 billion consumers on its e-commerce platforms. During the company’s conference call after posting its fiscal-fourth-quarter earnings on Thursday, company CEO Daniel Zhang cited reasons he’s optimistic of hitting the $1 trillion GMV goal. One big reason, he noted, is Alibaba’s successful transition from PCs to mobile devices. By comparison, e-commerce software firm ChannelAdvisor ( ECOM ) estimates Amazon.com ‘s ( AMZN ) GMV in 2015 at $225.6 billion, with 310 million users. At the time of Alibaba’s initial public offering in September 2014, mobile contributed less than 40% of GMV. Today, it’s 73%. Success also depends on international expansion and in continuing to transform its e-commerce business, along with continued investments and growth in its media and digital entertainment platforms, as well as its cloud computing business. Alibaba is one of the four largest Internet companies in China. The others are JD.com ( JD ), which runs a direct-to-consumer e-commerce site similar to Amazon ( AMZN ); China search-engine leader Baidu ( BIDU ); and Tencent Holdings ( TCEHY ), which dominates in gaming and mobile messaging. For all Zhang’s bravado, Alibaba is less than halfway toward its goal: For its fiscal year ended March 31, Alibaba had GMV of $485 billion, up 27%. And it said it had 423 million active buyers, up 21%. GMV is the total value of goods sold across Alibaba’s e-commerce platforms. Alibaba does not take part in direct sales, hold inventory or compete directly with its merchant base. Businesses and consumers use Alibaba’s e-commerce platform, and Alibaba takes about a 2.5% cut of GMV sales. It also makes money from advertising. Alibaba Counts On Growth For Tmall, Taobao Alibaba’s core e-commerce retail platforms are Taobao, Tmall and Juhuasuan. Together, they have 367 million active buyers, with about 90% of Alibaba’s revenue generated in China. Getting to $1 trillion will depend on the growth and expansion mainly of Tmall and Taobao. Tmall is China’s largest business-to-consumer website. Taobao is a consumer-to-consumer e-commerce website similar to eBay ( EBAY ). Taobao is the larger of the two. In fiscal 2016, it hit GMV of $295 billion, up 18%. Tmall reached $190 billion, up 43%. Part of Alibaba’s GMV growth is pegged to global expansion. Alibaba last month announced it acquired a controlling stake in Singapore-based Lazada, a leading e-commerce platform in Southeast Asia, for $1 billion. Lazada operates online retail platforms across Indonesia, Thailand, Philippines, Malaysia, Vietnam and Singapore, with GMV of $1 billion in 2015. “Our acquisition of a controlling stake in Lazada will allow access to 560 million consumers in one of the most promising markets for e-commerce,” said Chung Tsai, Alibaba executive vice chairman, in the earnings conference call. Alibaba in the March quarter showed its highest growth rate in a year, despite an economic slowdown in China. “In these challenging times for the global economy, Alibaba is bucking the trend,” said Tsai. He said Chinese households today have aggregate net cash reserves of more than $4.6 trillion. “This accumulated wealth and liquidity is the result of real double-digit wage growth over the past decade,” he said. Kerry Rice, an analyst at Needham, says Alibaba has a lot of room for growth ahead. “We expect the company’s core business to continue to be the engine of growth, and despite its scale and dominant market share, we believe it still has significant room for growth,” Rice wrote in a research report. Rice rates Alibaba stock a buy, with a price target of 95. Alibaba stock was up a fraction in afternoon trading in the stock market today , near 79.50. Alibaba stock is up nearly 30% since touching a seven-month low in early February. Alibaba’s stock has had a rocky trip since its blockbuster IPO raised $24 billion, the most ever. Shares priced at 68 and hit a peak of 120 in November 2014. RBC Capital Markets analyst Mark Mahaney has an outperform rating and price target of 105 on Alibaba stock, up from a previous target of 89. Based on its strength in mobile, “we believe this means Alibaba can sustain premium growth rates in its key retail segment for the foreseeable future,” Mahaney wrote in a research note.

Alibaba Posts Highest Growth In A Year Despite Sluggish China

China e-commerce giant Alibaba ( BABA ) turned in a quarterly earnings report early Thursday that largely eased concerns of slowing performance, despite a sluggish Chinese economy. Alibaba reported revenue of $3.75 billion for its fiscal Q4 ended March 31, beating the Wall Street consensus of $3.58 billion. Sales rose 39% in local currency year over year, the company’s highest growth rate in the past four quarters. Earnings per share minus items rose 88% to 33 cents, but that was far below the consensus of 55 cents. Costs associated with new businesses initiatives and rising logistics and order-fulfillment costs weighed on the company. Still, Alibaba stock was up nearly 4% in early trading in the stock market today , near 79. The stock is up 35% from a seven-month low of 59.25 touched on Feb. 9. Alibaba credited the revenue beat to strong growth in mobile users, active buyers and transactions on its China e-commerce platforms. “Our focus on long-term strategic priorities — globalization, rural expansion, building a world-class cloud computing business and creating a comprehensive media and entertainment platform — has laid a strong foundation for future growth,” Alibaba CEO Daniel Zhang said in the earnings release. Alibaba competes with JD.com ( JD ), Baidu ( BIDU ) and Tencent Holdings ( TCEHY ) in various segments of China’s Internet economy. JD is China’s largest online direct-sales retailer, Tencent dominates in messaging and gaming, and Baidu is China’s search leader. The four are the largest Internet companies in China and have been investing aggressively in new areas to spur growth. JD is scheduled to report earnings before the market open on May 9. Alibaba reported gross merchandise volume (GMV) of $115 billion, slightly edging the consensus of $112 billion and up 24% year over year. Transactions through mobile devices accounted for 73% of GMV volume. It reported annual active buyers of 423 million, up 16 million from the prior quarter and up 21% year over year. Monthly mobile active users reached 410 million, an increase of 17 million from the prior quarter and up 42% year over year. Alibaba’s cloud computing and Internet infrastructure business continued its rapid expansion, with revenue jumping 175% year over year to $165 million. That’s above the 126% growth achieved in the prior quarter.

Alibaba Stock Rises As Strong Revenue Growth Trumps Earnings Miss

Alibaba Group’s fourth-quarter revenue rose a better-than-expected 39 percent after China’s biggest e-commerce company drew in more users and boosted services to merchants on its platforms. Sales jumped to 24.2 billion yuan ($3.7 billion) in the three months ended March, Alibaba ( BABA ) said. That compares with the 23.2 billion-yuan average of estimates compiled by Bloomberg. Adjusted earnings-per-share were 3.02 yuan compared with analyst projections for 3.52 yuan. Alibaba’s platforms, which link buyers and sellers, hit a 3 trillion yuan milestone of goods sold as the company continues to expand even as the Chinese economy grows at the slowest pace in 25 years. The online emporium is making more from mobile advertisements, deepening its push into rural domestic regions and branching out overseas to boost transactions. “Alibaba is still growing very nicely and sustaining very high margins in the face of the concerns about Chinese consumers and the face of competition,” said Gil Luria, an analyst with Wedbush Securities Inc. “It’s good results for Alibaba and it seems like their business is holding up.” Net income rose 85 percent to 5.3 billion yuan, just shy of the 5.4 billion-yuan average of estimates. Affiliate Zhejiang Ant Small & Micro Financial Services Group, which owns Alipay, incurred a net loss after spending to drive user growth, the company said Thursday. Shares of Alibaba rose more than 4 percent in pre-market trading. The stock has dropped 6.7 percent this year compared with a 1.4 percent advance in the NYSE Composite Index. Revenue on Alibaba’s Chinese retail e-commerce platforms jumped 41 percent, driving growth in spending by merchants on the company’s marketing services. Commissions accounted for about a third of that. Alibaba has pulled out the stops to get its e-commerce platforms in front of villagers, setting up free Internet-equipped computers and working with local officials to train potential buyers and sellers. It had a presence in 12,000 villages across the country by the end of January, out of about 600,000. That effort to diversify the business comes as Alibaba is simultaneously trying to tap more of the 620 million Chinese who access the Internet from their smartphones and tablets. “The company was able to better monetize on selling advertisements to merchants,” Marie Sun, an analyst at Morningstar Investment Service, said before the earnings. “As the economy growth slows, it seems that merchants are more willing to place ads with bigger platforms like Alibaba that have a wider reach of customers.” The cloud computing business almost tripled revenue to more than 1 billion yuan and the business now has more than half a million paying customers.