E-commerce giant Alibaba Group Holding Ltd. has revolutionized retailing in China, branched out into financial services, and is now trying to expand into mobile technology, entertainment and sports. The company’s first full quarterly report card to Wall Street investors is due to take place tomorrow.
Coming off Alibaba’s record-breaking $25 billion IPO in September, the company’s shares have remained 45 percent above their debut price. Just about every brokerage has rated the e-commerce giant a buy, taking comfort in the group’s dominant position in a $450 billion Chinese market.
The expectations for Alibaba are gigantic. First, it’s NYSE IPO debut was a record $25 billion and it’s share price has already soared 45 percent since that IPO, giving it a market value of $243 billion as of Friday (Oct. 31), bigger than Facebook. Beyond the usual revenue and profit stats, analysts will be pouring any numbers or comments about smartphone apps, E-Commerce efforts, mobile payment moves, acquisitions and particularly any hints about Alipay’s financial services interests and possible partnership with Apple Pay.
“Every investor will be looking at the results very closely,” Tony Chu, a Hong Kong-based portfolio manager said at RS Investments. “As a public company, Alibaba needs to disclose more and talk to investors more,” Chu added.
Investors have been all too eager to overlook a structure that critics say allows its management extraordinary decision-making power, potentially to the detriment of shareholders. They have also mostly withheld judgment on how advertising spending and sales commission fees, where Alibaba makes the lion’s share of its money, are being affected in a slowing Chinese economy.
Moreover, while Alibaba can depend on its still-growing home market for years to come, expanding internationally will be difficult given its marginal presence in foreign markets, which now yield just about 9 percent of overall sales, analysts say.
At home, JD.com Inc is chipping away at its market share, using an Amazon-like model where it builds its own warehouses and handles logistics. Alibaba’s marketplace model, relinquishing control over logistics, may hurt it in the long run by putting product quality at risk. The Chinese e-commerce company, founded by former schoolteacher Jack Ma in his apartment in 1999, has designs of expanding beyond its commerce roots.