Alibaba’s shares slide down after projecting slowing growth
By MYBRANDBOOK
Alibaba Group Holding shares slide after projecting revenue growth will be slow this year, reflecting post-COVID-19 economic uncertainty at home as well as the potential for U.S.-Chinese tensions to disrupt its business.
Its stock slid as much as 4% in Hong Kong, after a drop of almost 6% in New York before the weekend. The e-commerce giant forecast sales growth this year of at least 27.5% to more than 650 billion yuan ($91 billion), down from 35% previously and slightly below analysts’ estimates.
Online shopping began to bounce back from March, executives said. But the tepid outlook demonstrates the world’s second-largest economy has yet to fully shake off pandemic, with consumers still hesitant about spending on big-ticket items.
“The market is a bit disappointed despite the strength given 2Q guidance of 20-30% YoY growth for JD and 99% GMV growth in 1Q20 for PDD,” CICC analyst Natalie Wu wrote.
“We regard Alibaba’s advantage as a market leader as intact and unchanged in the longer run, though it may take several quarters for market sentiment to swing back.”
Alibaba has lost more than $70 billion of market value since the coronavirus first erupted in January, and now has to grapple with not just an uncertain global economic environment but also any potential fallout from U.S.-Chinese financial tensions.
On Friday, executives sought to assuage concerns about a U.S. bill that mandates much closer accounting scrutiny of U.S.-listed Chinese companies and may bar them from American bourses.
Chief Financial Officer Maggie Wu said Alibaba’s financial statements have been consistently prepared in accordance with U.S. GAAP accounting measures and were beyond reproach. “The integrity of Alibaba’s financial statements speak for itself, we have been an SEC filer since 2014 and hold ourselves to the highest standard,” she told analysts on a conference call. “We will endeavor to comply with any legislation whose aim is to protect and bring transparency to investors who buy securities on U.S. stock exchanges.”
The bigger short-term challenge is in reviving growth: Alibaba’s bread-and-butter customer management or marketing business grew just 3% in the March quarter. Much of that stems from weaker consumer sentiment during the Coronavirus-stricken quarter, when total Chinese e-commerce rose just 5.9% or at less than a third of 2019’s pace, according to government data. Jefferies analysts led by Thomas Chong wrote that Alibaba’s guidance was in fact a positive when viewed against an array of uncertainties gripping the post-Covid 19 global economic environment.
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