Takeaways in Alibaba Q3 earnings

$Alibaba(BABA)$ Q3 earnings in brief:

1. The overall revenue was slightly lower than expected (260.3 billion vs 261.2 billion consensus), but the market has already priced it in, due to the performance of Pinduoduo (PDD) (whose market value has surpassed BABA for a period) and the overall consumer environment falling short of expectations (negative inflation).

2. The international business is still in the expansion phase (up 44% year-on-year), but the losses have increased, indicating intense competition. The routes in Southeast Asia, Russia, Central Asia, East Asia, and Europe are the opposite of PDD's Temu, and the geopolitical risk is not as high. It is said that AliExpress intends to enter the U.S. market, which could be a good way to increase revenue if successful.

3. Cainiao's growth rate is 72%, and it is basically ready for an IPO, expected to start in March. On the other hand, logistics performance is good, but overall revenue has declined, reflecting the intense competition and the lack of overall revenue due to the sinking demand despite possibly stable transaction volume in domestic e-commerce (Taobao).

4. Alibaba Cloud's growth rate exceeded expectations at 3%, and the EBITA profit margin also reached over 8%.

5. The addition of a $25 billion share repurchase is huge. With the remaining amount of the previous $40 billion repurchase quota running low, along with the newly approved $25 billion quota, there is currently around $38 billion left. Relative to the current market value of $200 billion, the repurchase ratio is close to 20%, comparable to some tech giants in the U.S. stock market.

Market impact

1. Pessimistic expectations still exist due to competition (both domestic and international) and market conditions.

2. However, optimistic factors are gradually increasing, as business will always have ups and downs. The turnaround of e-commerce can be seen from the basic situation, but it will take time. The timing of overseas profitability may become a key point for valuation improvement, with Jiang Fan being crucial.

$Alibaba(09988)$