Alibaba Mobile Gain Brings Joy And Pain As Revenue Misses
The best thing going for Alibaba was also a reason China's e-commerce leader missed revenue estimates Thursday, sending its stock falling 8.8% to a three-month low.
Alibaba (BABA) reported fiscal Q3 sales that rose 40% from the year-earlier quarter to $4.2 billion, boosted by mobile growth, but the analyst consensus estimate called for $4.45 billion.
In a conference call with analysts, CFO Wei Wu called the miss "mainly a result of the greater percentage of total gross merchandise volume coming from mobile, which monetizes at a lower rate.
Alibaba processed $127 billion in gross merchandise volume across all its online commerce platforms, up 49% from the year-earlier quarter. Mobile accounted for 42% of total GMV, up from 36% in the prior quarter. But the company is not yet making as much money from those mobile transactions as analysts and investors would like.
The rapid growth in mobile purchases might give Alibaba some near-term pain, Wu said, "but it bodes well for the future success of our entire ecosystem. Our mobile monetization rate has continued to improve," she said on the call. "These mobile devices are extremely data-rich and will eventually offer a much better buyer experience ... we believe will create significant long-term value.
For the quarter ended Dec. 31, Alibaba reported earnings per share minus items of 81 cents. Analysts had expected 75 cents.
Alibaba, which handles more e-commerce transactions than Amazon.com (AMZN) and eBay (EBAY) combined, ended calendar 2014 with 334 million active buyers, up 45%. That's 27 million, or 8.8%, above the prior quarter.
Monthly mobile users reached 265 million, up 48 million than the previous quarter and 95% from a year earlier.
"While we expect Alibaba to continue to dominate the rapidly growing Chinese e-commerce market for years to come, we believe that near-term predictability of growth and margins has deteriorated given the company's continued transition to mobile and changes to its user experience," wrote Youssef Squali, an analyst at Cantor Fitzgerald, in a research report.
Concerns about growth rates are amplified by recent tensions between Alibaba and China government regulators.
China Gov't Critical
On Wednesday, China's State Administration of Industry and Commerce sharply criticized Alibaba, saying the company "did not pay sufficient attention" to sales of counterfeit goods and other illegal business activity.
The SAIC report made investors nervous, says Scott Kessler, an analyst at S&P Capital IQ.
"The perception has been that Alibaba has had good relationships with China authorities and regulators, and the implication that those relationships are not as strong as before is a source of worry for some," Kessler said. "Does this mean that Alibaba will have to spend more money to meet the demands of regulators, are there penalties that could accrue and what impact will all this have on Alibaba's ability to operate and grow?
On the call, Joe Tsai, Alibaba executive vice chairman, addressed the criticism.
"We believe this report was flawed and was based on arbitrary methodology," Tsai said. "We have a zero-tolerance policy toward counterfeits on our platform because the health and integrity of our marketplaces depend on consumer trust.
Tsai said Alibaba has a broad range of measures to prevent counterfeit and pirated goods from being offered and sold on its sites.
Yahoo (YHOO), which plans to spin off its 15.4% Alibaba stake, tumbled 5.9%.
