China – Alibaba tightropes to please investors, Beijing
Alibaba (9988.HK) is walking a tightrope. A record $2.8 billion antitrust fine resulted in a quarterly net loss – the Chinese e-commerce group’s first since going public. But Alibaba forecasts that annual sales will jump 30% to $144 billion in the next fiscal year. That should soothe jittery shareholders. Regulators, though, are increasingly at odds with the group’s competitive edge – its vast data trove.
Beyond the one-off fine, the sprawling shopping empire led by Daniel Zhang seems be weathering the ongoing crackdown just fine. Revenue from its core domestic retail business rose 74% year-on-year, to $19 billion, in the three months to March, thanks to a surge in online orders and a recent acquisition of a supermarket chain. Zhang is also confident that Alibaba’s massive user base, which grew to 890 million in China in the quarter, could surpass 1 billion soon. Other bright spots include fast-growing cloud computing and logistics units, which together make up 14% of total sales.
That should help assure investors that the company has broadly moved on from its regulatory woes. In addition to the financial penalty, antitrust officials last month ordered Alibaba to make “thorough rectifications” to its business and submit self-assessment reports for three years. Its shares have slumped by nearly a fifth from a February peak, and trade at just 20 times forward earnings, Refinitiv data shows, well below rival JD.com’s (9618.HK) 38 times.
Business as usual, though, risks more scrutiny from Beijing. President Xi Jinping has stepped up his campaign to rein in the country’s freewheeling technology titans. After a flurry of anti-monopoly measures, officials have set their sights on data regulation. That could be ominous: Alibaba crunches vast amounts of information on its users to help sellers better market their products. Founder Jack Ma, who once likened data to oil and water of the future, is even nicknamed “Data Ma”.
Alibaba has learned the hard way that the nail that sticks out will get hammered down. Pleasing both shareholders and Beijing will only get harder.
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– Chinese e-commerce group Alibaba on May 13 reported revenue of 187 billion yuan ($29 billion) in the three months to March, an increase of 64% from the same period last year. That compares to an average analyst forecast of 178 billion yuan, according to analyst estimates from Refinitiv.
– The company reported a net loss of 7.6 billion yuan in the first quarter, largely due to an anti-monopoly fine it paid totalling 18.2 billion yuan.
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