China’s Alibaba is forecasting annual revenue growth of 45 to 49 per cent this year, a target that exceeds analysts’ estimates by 10 percentage points and elicited gasps of “wow” and loud clapping from investors at the ecommerce group’s Hangzhou headquarters.
Analysts had been expecting revenues this year to come in at $31.42bn, according to Bloomberg. Alibaba’s forecast implies sales of up to $34.3bn in the year to the end of March.
The bullish call highlights the rise of Alibaba, founded by former teacher — and now China’s richest man — Jack Ma. The ecommerce group has spawned an entire ecosystem comprising logistics, payment and cloud data centres which has made the company, along with fellow tech titans Baidu and Tencent, a big part of daily life in China.
The guidance puts Alibaba, which in May recorded its biggest quarterly rise in revenues since its blockbuster initial public offering in 2014, on track for its biggest annual underlying rise so far, said Maggie Wu, chief financial officer, addressing analysts at the company’s investor day.
Last year revenues increased by 56 per cent, but that included Lazada, the Southeast Asian ecommerce group that was consolidated into Alibaba’s numbers from April. Stripping that out, said Ms Wu, would have whittled last year’s growth of 56 per cent back to 44-45 per cent.
“[This] means by having such a big business, a larger business, we continue to accelerate revenue growth,” she said.
The Securities and Exchange Commission last year launched an investigation into how Alibaba accounts for its Cainiao Network logistics business and into the massive, and previously unaudited, gross merchandise volume numbers.
That investigation focused on all items that are bought and sold on that group’s network.
Alibaba no longer announces these figures on a quarterly basis, and Ms Wu did not discuss gross merchandise volume numbers in her presentation.
Alibaba shares have been on a roll this year, along with tech stocks across China and the US, and are up 43 per cent so far this year at $125.64. With a market capitalisation of $317.8bn, it is among the top 10 largest companies globally by equity value.
By having such a big business, a larger business, we continue to accelerate revenue growth
Growth this fiscal year will continue to be driven by the core retail business, including in newer areas such as physical supermarkets and international businesses. Last year that business generated adjusted margins of 59 per cent on the basis of earnings before interest, tax and amortisation.
“We are willing to invest that money into expansion of the consumer business,” Ms Wu said. “And to make that very clear, we are going to invest that to gain B2C [business-to-consumer] market share.”
While Alibaba has powered ahead on ecommerce, gobbling up Yahoo’s China operations and driving eBay out of China in the process, it is increasingly rubbing against its domestic peers — together with Baidu and Tencent, the trio make up the BAT trinity — in other areas.
In payments, Tencent’s Weixinpay has been narrowing the gap with Alipay, run by Alibaba affiliate Ant Financial, and on livestreaming its wholly owned Youku Tudouhas lost some luxury advertisers to other platforms like Weibo, which is 31 per cent owned by Alibaba.