Alibaba (NYSE:BABA) reported its financial results for the first quarter ended March 31, 2024. Earnings fell short of analyst expectations, sending its stock more than 6% lower on Tuesday.
The Chinese e-commerce giant posted an adjusted earnings per share (EPS) of RMB10.14 (US$1.40), which was RMB0.13 below the analyst estimate of RMB10.27. Despite this miss, the company's revenue saw a 7% increase to RMB221.87 billion (US$30,729 million), slightly above the consensus estimate of RMB220.32 billion.
Alibaba's CEO Eddie Wu attributed the quarter's performance to the company's strategic focus on customer experience and growth in its China and international commerce businesses. However, the earnings miss was a key factor in the stock's decline.
Alibaba's revenue growth was driven by a 7% year-over-year (YoY) increase, signaling a return to growth as highlighted by CFO Toby Xu. The company also reported a net income decrease of 96% YoY, primarily due to a net loss from investments in publicly-traded companies, contrasting with a net gain in the same quarter of the previous year.
The company's strategic investments in its e-commerce businesses and retention incentives for Cainiao employees led to a 5% decrease in adjusted earnings before interest, taxes, and amortization (EBITA). Additionally, net cash provided by operating activities and free cash flow both saw significant decreases of 26% and 52% YoY, respectively. Despite the challenges, Alibaba remains confident in its business outlook.
Alibaba's focus on enhancing user experience through strategic investments in areas such as price-competitive product supplies and technology has resulted in improved consumer retention and higher purchase frequency. This strategy, along with the growth in the number of 88VIP members, has led to double-digit online gross merchandise volume (GMV) and order growth YoY.
The company's cloud intelligence and international digital commerce groups also reported revenue growth, with the latter experiencing a 45% surge YoY. Efforts to strengthen cross-border e-commerce and delivery capabilities have been key drivers of this growth.
Alibaba also announced an aggregate dividend of $4 billion dividends (regular and one-time) for fiscal year 2024.
Reacting to the report, analysts at Jefferies said total revenue was in line with consensus and their estimates.
"By segment, TTG revenue grew 4% YoY, among which CMR grew 5% YoY (vs our estimates at 2% YoY). Overall adjusted EBITA declined 5% YoY to RMB23.97bn (1.1% ahead our estimate). For TTG, segment adjusted EBITA declined by 1% YoY (vs our estimates at 3% YoY decline)," explained the firm. Jefferies maintained a Buy rating and a $114 price target on the stock.
Meanwhile, analysts at Mizuho highlighted that BABA's CMR grew 5% YoY, 2 points above consensus and consistent with their checks, as they expected a growth recovery due to a mix shift to Taobao from Tmall.
"Profitability came in largely in line with expectations, TaoTian Group EBITA came in at 38.5bn RMB vs Street expectations of 38.6bn RMB," said the firm.