Why Alibaba Earnings Might Have Nowhere to Go but Up
Alibaba Friday morning reported revenues and profits that beat estimates and the company is looking for another year of revenue growth that at least matches the one just concluded.
Alibaba Group Holding Ltd. (NYSE: BABA) reported fiscal fourth-quarter and full-year 2018 results before markets opened Friday. The China-based internet giant reported adjusted diluted earnings per American depositary share (ADS) of $0.91 on revenues of $9.87 billion. That compares to earnings per ADS of $0.69 and revenues of $6.09 billion in the same period a year ago. Fourth-quarter results also compare to the consensus estimates for earnings of $0.86 per ADS on revenues of $9.27 billion.
One ADS is equal to one ordinary share, and the exchange rate used is based on 6.2726 yuan per dollar.
For the full year, Alibaba reported earnings per ADS of $5.24 and revenues of $39.9 billion. In the prior year, the company reported earnings of $3.70 per ADS and revenues of $24.98 billion. Analysts were looking for $5.20 per ADS and $38.95 billion.
The number of annual active buyers on Alibaba’s retail marketplaces totaled 552 million at the end of the fourth quarter, up by 98 million (21.5%) year over year. Monthly mobile active users rose from 507 million last year to 617 million (up 21.7%) at the end of March. The company’s core commerce revenues rose by 60% year over year, the cloud-computing segment revenues rose by 101%, digital media and entertainment segment revenues rose 33% and other revenues increased by 10%.
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The company’s chief financial officer, Maggie Wu, said:
Looking ahead to fiscal 2019, we expect overall revenue growth above 60%, reflecting our confidence in our core business as well as positive momentum in new businesses. We expect our new growth initiatives will drive long-term, sustainable value for our customers and partners and increase our total addressable market.
Alibaba did not provide a detailed forecast in its press release. Analysts expect earnings per ADS of $1.40 on revenues of $11.65 billion in the company’s first fiscal quarter of 2019. For the full fiscal year ending next March, consensus estimates call for earnings per ADS of $6.54 on revenues of $54.48 billion. That estimate is well short of the 60% growth Wu is predicting — about $9 billion short.
Alibaba’s ADSs traded up around 2% in Friday’s premarket session, at $186.12 in a 52-week range of $114.00 to $206.20. The consensus 12-month price target was $217.63 per ADS before this morning’s announcement. The high price target estimate is $257.51.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
