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Alibaba praises guidance due to COVID risk; resilient Q4 lifts stock

The logo of the Alibaba Group was seen in the office in Beijing, China on January 5, 2021. REUTERS / Thomas Peter

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  • Q4 adjusted earnings 7.95 yuan / share vs estimate 7.31 yuan / share
  • Q4 revenue up 9% to 204.05 billion yuan compared to the estimated 199.25 billion yuan
  • Analysts say Q4 was more robust than expected
  • Alibaba: ‘not prudent’ to provide guidance given COVID risk
  • Shares rise by 15% on earnings, earnings hit

May 26 (Reuters) – Alibaba Group (9988.HK), said on Thursday that it would not provide a forecast for the current fiscal year because the COVID-19 risk confused the outlook, after reporting its slowest quarterly revenue growth since it was listed in 2014 .

However, the markets focused on Alibaba’s quarterly earnings and earnings in a sharply weakened economy, sending shares up 15%. Analysts said the results were more robust than expected.

“As Alibaba’s large scale reflects the overall macroeconomics, we believe it is the key benefit of a potentially beneficial policy rollout in terms of decommissioning measures and consumption stimulus,” Daiwa Capital analysts said in a note.

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After two months of severe covid barriers that pushed up spending, Beijing this week announced measures to support the economy.

Alibaba said on Thursday that the restrictions weighed on its business by preventing sellers from shipping goods and causing consumers to focus on buying necessities. The gross value of physical goods online in the retail markets of China – a key measure – fell by a low percentage for teenagers in April from the previous year.

“To give you a sense of the extent of the impact – based on consumer address, cities with new COVID cases in April represented more than half of our China Retail Marketplaces GMV,” CEO Daniel Zhang said in a post-revenue call.

While delivery services resumed in May, they took time to fully recover due to factors such as parcel delay, the company said.

The company’s share had lost a third of its value this year before Thursday’s rise.

In addition to the shutdown effect, investors also remain nervous about the long-term prospects for Alibaba and its peers due to a regulatory intervention in the technology industry. They have been looking for signs that the worst may be over.

Earlier this month, China reassured the technology industry, saying the government supported the development of the sector and public listings for technology companies. read more

The company’s executives said Thursday that they believed the authorities had delivered a “clear” message that they recognized the economic importance of platform companies such as Alibaba.


China’s giant cities have been forced to shut down in the past two months, stopping millions of lives and prompting global businesses to warn consumers that they have stepped on the brakes on spending. read more

As a sign of China’s growing concern about the slowdown in growth, Prime Minister Li Keqiang promised to get the world’s second largest economy back on track.

Alibaba’s Zhang said the government had sent “important political signals” about its commitment to stabilizing the economy.

For the January-March quarter, Alibaba reported a 9% increase in turnover to 204.05 billion yuan ($ 30.35 billion) – the lowest growth rate since the IPO, but ahead of an average analyst estimate of 199.25 billion yuan, according to Refinitiv.

Alibaba said growing demand from Chinese trading entities, including Tmall Supermarket and Freshippo, as well as niche trading platforms such as Taobao Deals and Taocaicai helped sales.

Revenue in Alibaba’s cloud computing division increased by 12%, and sales in the core trading unit, the company’s largest, increased by 8% to 140.33 billion yuan.

Annual active consumers on their platforms reached around 1.31 billion for the fiscal year, including over 1 billion consumers in China for the first time.

Ant Group, Alibaba’s fintech affiliate, reported a profit of around 22 billion yuan for the quarter ended December, compared to 21.76 billion yuan a year ago. Alibaba said it received a dividend of 3.9 billion yuan from Ant, the first time the fintech conglomerate has paid one.

($ 1 = 6.7240 Chinese yuan)

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Reporting by Brenda Goh in Shanghai and Nivedita Balu in Bengaluru; Edited by Anil D’Silva, Tomasz Janowski and Sayantani Ghosh and Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.

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