Last week, Alibaba (BABA) posted poor revenue growth. Speculators expected worse results and lifted BABA stock from below $80 to around $84. The market rewarded those who bought the stock at the $65 low from last month. What should investors do now?
Alibaba earned $1.82 a share (non-GAAP EPADS). Revenue rose by 3.0% Y/Y to $29.12 billion. CEO Daniel Zhang said that Alibaba’s resilient business model offset its ongoing macro environment challenges. Furthermore, the global landscape is worsening. This reinforces the company’s need to pivot to high-quality growth levers.
Alibaba’s gross merchandise volume needs live-streaming content to encourage more return purchases. The company has plenty of revenue gaps to fill. It faced lower advertising revenue due to the weak macro environment.
The e-commerce site will need to pitch more effective product recommendations. Alibaba also needs to attract higher-paid search volumes as its smart recommendation engine improves.
Risk
China has harsh pandemic control measures. Until its economy returns to normalcy, BABA stock will have uncertainties ahead. Once the pandemic ends, consumer confidence in China will rebound. Chinese consumers will need to see sustained economic stability in 2023. Without that confidence, BABA stock might falter.
