Mobile gains buoy Alibaba earnings

Mobile is the key word for Alibaba Group Holding Ltd, which saw its stock close at an all-time high Tuesday after the Chinese e-commerce giant issued its first earnings report as a public company.

Shares of Alibaba (BABA) closed at $106.07 (649 yuan) on the New York Stock Exchange, up $4.27.

Granted, Alibaba only had its initial public offering in September, when it debuted at $68 a share.

The buzz around the company continued as Alibaba saw revenue climb nearly 54 percent to $2.74 billion in the quarter ended Sept 30, compared with the year-ago period.

Adjusted earnings came in at 45 cents a share. Analysts surveyed by Thomson First Call were expecting EPS of 45 cents on revenue of $2.61 billion. The company did , however, report a 39 percent drop in net income, to $494 million. Alibaba attributed the decline to share-based compensation charges and an increase in amortization expenses and taxes.

Alibaba's mobile revenue rose 1,020 percent year over year to $606 million.

Joseph Tsai, executive vice-chairman of Alibaba, said on the post-earnings conference call that the Hangzhou-based company conducts more than one-third of its retail business through mobile applications.

"Consumers who come to use Alibaba's services come with a clear commercial intent, and we are able to convert that into purchases," Tsai said. "Our ecosystem will continue to be enhanced by the consumer shift to mobile."

Alibaba CEO Jonathan Lu said product changes and improved search- and recommendation-engine services also were factors in the company's growth.

He said that the upcoming 11/11 shopping holiday will feature the first cross-border retail involvement since the event's inception in 2009.

"In 2013, 11/11 achieved a milestone of passing Black Friday and Cyber Monday combined in terms of online GMV (gross merchandise volume)," Lu said. "This year, it will expand its scope."

Alibaba's GMV increased almost 49 percent from $61 billion in September 2013 to more than $90 billion. Overall profit margins fell to a two-year low of 18 percent, hampered by share-based compensation charges of $490 million.

Edward Williams, a managing director of equity research for financial services provider BMO Capital Markets Williams, said increasing user growth and the company's monetization rate, or the ability to convert gross merchandise volume from Alibaba's mobile platforms into revenue "really stood out" in the quarter. "Given the size of the business, that's a pretty encouraging data point."

Williams issued a price target of $110 a share and an "outperform" rating on the stock after the earnings announcement.

"While the revenue yields came in better than what was expected, we did certainly see expenses going up at a greater rate than we anticipated," Williams said in an interview with China Daily. "That gives you a good indication that the company is not sitting idly by while they generate significant cash flow, but rather taking that cash and investing it into opportunities."

Alibaba also recorded a year-on-year increase in the number of monthly active users (MAUs), from 91 million to 217 million in 2014, or 138.5 percent. Annual active buyers totaled 307 million, 52 percent more than in the year-ago quarter.

Alibaba helps connects buyers and sellers alike through six online marketplaces. Its Taobao.com and Tmall.com are the largest and China's largest third-party platform for brands and retailers, respectively, based on data from iResearch, a leading Chinese Internet industry consultancy. The New York Times reported on Sept 10 that Taobao and Tmall account for nearly 80 percent of all Chinese e-commerce transactions.

Ahead of its record-breaking $25 billion IPO in September, Alibaba made headlines with a number of acquisitions, including partnering with Amazon.com rival ShopRunner Inc and with AutoNavi Software Co, a navigation- and location-based solutions provider.

Since the IPO, shares have not fallen below $80. Shares closed at $93.89 on Sept 19, their first day of trading.

Jack Ma, Alibaba's co-founder and executive chairman, has also been pursuing partners for media content and mobile payment systems. He did notparticipate in Tuesday's conference call.

Williams, of BMO Capital Markets, said Alibaba needs to "reinvest in the platform to drive more traffic".

Reuters contributed to this story.

jackfreifelder@chinadailyusa.com