What happened
Actions of Alibaba Group Holding (NYSE: BABA) were rising today, a day after the Chinese tech giant reported a strong quarterly earnings report. Today, the company has benefited from a chorus of positive notes from analysts, as well as news of tension between the Chinese government and Ant Group, Alibaba’s former financial arm in which it owns a third of the shares.
The stock closed up 3.5% after gaining up to 5.4% at the start of the session.
Image source: Alibaba.
And
Revenue jumped 37% to $ 33.9 billion in the quarter ended December 31, 2020, above estimates of $ 33.4 billion. Adjusted EBITDA increased 22% to US $ 10.4 billion and adjusted earnings per share increased 21% to US $ 3.38, also exceeding expectations of US $ 3.25.
Alibaba’s shares retreated yesterday, but today five analysts have raised their share price targets, maintaining purchase ratings and showing general approval for third quarter results.
Investors also seemed to applaud the news that Ant Group has reached an agreement with Chinese regulators to turn Ant Group from a fintech company into a financial holding company. This could pave the way for Ant Group’s IPO, which was blocked by Chinese regulators in November. Ant was expected to be valued at $ 280 billion, leading to a payment to Alibaba that would make its stake worth almost $ 100 billion. That assessment may be affected by any changes in the company to comply with regulations, including the addition of stricter capital requirements, but the news is clearly a step forward for Ant Group. Alibaba’s shares in Hong Kong soared when the announcement was made.
What now
Management did not provide guidance on the earnings report, saying it would provide guidance for the next fiscal year in its next report. However, there is little reason to doubt the company’s momentum. Active customers increased by 22 million in the quarter to 779 million and had strong growth in the cloud, with 50% revenue, and logistics, where its Cainiao Network generated 51% revenue growth, showing the company’s diversification beyond e-commerce .
Alibaba has faced controversy in recent months over the Ant IPO, an antitrust investigation, and reports that founder Jack Ma was “missing”, but news from Ant shows an apparent meltdown in his relationship with Chinese officials. Considering its growth rate and its price / profit ratio of just 27, the stock looks like one of the best bargains on the market at the moment.