Why Alibaba’s Q1 Results Weren’t Enough

Alibaba Group Holding Ltd. (NYSE: BABA) reported fiscal first-quarter results before markets opened Thursday. The China-based Internet giant reported adjusted diluted earnings per American depositary share (ADS) of $2.10 on revenues of $22.8 billion. The consensus estimates had called for EPS of $1.77 on revenues of $14.5 billion. One ADS is equal to eight ordinary shares, and the exchange rate used is based on 7.0651 yuan per dollar.

As of June, Alibaba’s China retail marketplaces had 874 million mobile monthly active users, up 28% sequentially, and annual active consumers increased by a net 16 million to 742 million.

Operating income totaled $4.9 billion, up 42% year over year. Adjusted earnings before interest, taxes, depreciation and amortization rose 30% to $7.2 billion. Cash flow from operations totaled $7.1 billion and free cash flow totaled $5.2 billion.

Gross merchandise value at the company’s Tmall e-commerce site rose by 27% year over year. Tmall sells primarily physical goods, focusing on offering overseas brands directly to Chinese consumers.

Alibaba also operates a 214-store grocery chain in China’s tier 1 and tier 2 cities and a half-day delivery service from another chain. Food delivery and a last-mile delivery service posted growth of 30% and more than 100%, respectively, in the quarter.

The company also offers the largest public cloud service in China, and revenue rose by 59% year over year in the technology business to $1.7 billion.

CFO Maggie Wu commented that the company’s core commerce business has recovered fully to pre-COVID-19 levels “across the board.”

Alibaba did not provide guidance, but analysts are looking for second-quarter EPS of $2.00 and revenue of $22.2 billion. For the full 2021 fiscal year, the consensus estimates call for EPS of $8.74 and $95.9 billion in revenue.

Investors traded the stock down in Thursday’s premarket session. They were down about 1%, at $258.17 in a 52-week range of $161.68 to $268.00. The consensus price target on the shares is $287.82. The company does not pay a dividend, but the share price is up 46% over the past 12 months, about three times the increase in the S&P 500 over the same period.

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