Alibaba Group Holdings Ltd. (NYSE:BABA) reported stronger-than-expected first quarter financial results for fiscal year 2017, with revenues of $4.84 billion and earnings of $0.74 per share. The figures exceeded the respective consensus estimates of $4. 54 billion and $0.63, while the company hit a 59 percent year-over-year growth in revenues led by strong growth in China retail marketplaces.
On the other hand, Gross Merchandising Volume climbed 24 percent year-over-year to $126 billion. Driven by cloud computing revenue, which added a massive 156 percent year-over-year to $187 million.
A market analyst said that the substantial growth in revenue trailed the robust performance of the China retail business. He also added, “Going forward, we expect BABA’s core ecommerce business to remain solid with high and sustainable margin outlook driven by improving monetization trend as the company continues to build a multi-dimensional platform where merchants and consumers can seamlessly engage. This should help to drive user engagement through social ecommerce transformations and command higher pricing with broadened value propositions to merchants; mobile transition with increasing upward trends for both mobile traffic and mobile monetization; and further reshaping of Chinese consumer shopping behavior through community, social and personalization leveraging big data technology.”
Analysts have raised their price target for Alibaba to $115 from $100, while reiterating a Buy rating.
The leading Chinese online retailer is briskly becoming a dominant force in the e-commerce market. Alibaba also has investments in a variety of other markets such as media and ride sharing car services. Therefore, the company has several growth levers to cash in and the stock is definitely a great buy.
Last Friday, shares of Alibaba closed up 7 percent to $98.25. The stock has advanced 12.5 percent since it released fiscal first quarter results ahead of Wednesday’s open, marking its best two-day stretch since it went public on September 19, 2014.
The stock traded with a volume of 71.7 million shares, almost six times the daily average of 12.5 million shares, and enough to make Alibaba the most-actively traded on US exchanges.
Reasons for a More Bullish View on Alibaba:
Alibaba posted outstanding fiscal first quarter earnings on Thursday, beating analysts’ estimates. While discussion of e-commerce transactions surging on mobile became the center of the announcement, market watchers also kept a close eye on the company’s cloud computing business, Alibaba Cloud.
Alibaba Cloud, which was launched in 2009, has developed into China’s leading cloud computing services provide, giving clients such as Dutch electronics giant Philips (NYSE:PHG), Schneider Electric (NS:SEIN) and marketing platform Blogmint a deep range of storage, security, and database management options.
Market experts who follow the company predict Alibaba Cloud to become a significant growth driver in the medium-to-long-term.
“AliCloud is massively underestimated in our view,” an internet analyst stated. China’s cloud market is on the verge of extensive growth, with Alibaba Cloud best positioned to gain the benefits.
One of Alibaba Cloud’s biggest advantages remains in China, which have allowed Alibaba Cloud to swiftly grow locally in ways offshore competition such as Amazon (NASDAQ:AMZN) Web Services and Microsoft (NASDAQ:MSFT) Azure could not due to the country’s data sovereignty and cyber-security regulations.