After the record IPO, now its down to business for the Chinese e-commerce giant
Tuesday sees the release of the first quarterly results from Alibaba before the market opens. The company had a spectacular IPO over a month ago, managing to capture the imagination of Wall Street. Yesterday the stock price reached a record level of $102.8 per share. What investors are looking for now is if the stellar growth will continue at the same pace.
This will be the first release for the company, making its complete numbers available to its shareholders and the eager public. Net profit is expected by the majority of analysts to jump to $1.17 billion. But with revenue still seen as the more important gauge of a growing company, it will be the number in focus – the same analysts anticipate a 45% increase to $2.61 billion.
Traders will be looking closely for signals on how Alibaba handles competition from different directions. Domestically Tencent have been their most prominent rival, as they occupy the vital smartphone space with their WeChat app, which has made inroads in offering products to its users. Alibaba are searching for their own answer to it by buying UCWeb, a mobile browser company, immediately announcing that they will be working together on a mobile search engine.
Mobile internet has seen a surge in global usage with all tech companies scrambling to establish themselves through various channels. Alibaba, even without being market leaders, still get 32.8% of their gross merchandise value from mobile as of June this year. Compared to 12% a year earlier, this is a tendency they will be looking to keep.
Another interesting point, the Chinese (sort-of) equivalent to Cyber Monday falls in the coming months, for which the company will issue its first guidance. Sales will most likely get a huge boost during the event called “Singles Day” on November 11th. In 2013 the single-day event accounted for $5.8 billion in transactions, breaking Alibaba’s daily record by over 80%. Traders will definitely be keeping an eye out next Tuesday.
Concerns still remain about the structure of the company, which was revealed prior to the public offering. All the decision-making power has remained with Jack Ma and several other co-founders, unlike the typical shareholder-centric philosophy of most public companies.
With the money from the IPO and all the directions of development, the company is also seen as a proxy to the local e-commerce industry and the wider Chinese economy, which although showing some signs of cooling off, is still growing at an impressive speed. This, together with the challenge of international expansion (foreign markets account for only 9% of revenue) will tell investors and traders if Alibaba will be more suitable for short term plays, or a longer “buy and hold.”