Alibaba Shares Dip Lower From Sales Misprojection

Alibaba’s Q3 earnings improved, but the slower Chinese economy dragged on sales. 

The e-commerce giant said revenues rose by 3% to 207.2 billion yuan in the latest quarter, lower than analysts’ expectations. 

Alibaba – Daily Chart

Alibaba – Daily Chart-Nov-17-2022-10-27-35-6065-PM

The price of BABA shares dipped on the earnings release and pivoted around the May price low. That will be resistance to further gains in Alibaba stock. 

The company reported a net loss of 20.6 billion yuan, partly due to equity investments. The figure was worse than the 18.8 billion yuan profit forecast by a Bloomberg analysts survey. Sales were higher by 3% to 207.2 billion yuan, slower than the 209.2 billion yuan that was expected. 

The Hangzhou-based company posted a net income of 33.8 billion yuan, 19% higher than a year earlier. Alibaba’s multiple revenue sources have been slammed by the zero-covid China strategy and a year of antitrust crackdowns by the government. 

Alibaba said that the latest loss was primarily due to “an increase in net losses arising from the decrease in market prices of [its] equity investments in publicly-traded companies and a decrease in share of results of equity method investors.” Much of the problems were created by the Ant Financial unit, which was caught up in the government tech crackdown. 

CEO Daniel Zhang said that “solid results had been achieved in an environment full of macro uncertainty.” Management also noted that the numbers had been achieved despite “the impact on consumption demand by the resurgence of COVID-19 in China and slowing cross-border commerce due to increasing logistics costs and currency volatility.” 

Zhang said on an earnings call that the company’s long-term success cannot be doubted after group revenues grew 12 times since the NYSE IPO in 2014. That compares to a doubling in China’s GDP for the period. 

BABA shares have the $78 level as resistance for further gains, and investors could look to an eventual lifting of covid restrictions for buying opportunities.

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