Alibaba’s (NYSE:BABA) strong Q1/2019 results will allay investor fears over holding China-based stocks. The total revenue growth of 42% affirms the online retailer’s strong business model regardless of the U.S./China trade war.
Alibaba reported revenue growing 42% overall. Cloud computing grew 66%, digital media and entertainment up 6%, and innovation initiatives up 21%. But Alibaba’s core commerce unit is driving the growth story. Revenue from Customer management rose 27% Y/Y while Commission was up 23%. Costs trends are stable, with the cost of revenue holding the 51% level and consistent with the previous year.
The company’s cash and cash equivalents of $30.9 billion is up from last year due to FCF generation from operators. This was offset by net cash usage in investments and acquisitions OCF (operating cash flow) fell 4% Y/Y, due to a drop in an annual payment of royalty fee and software technology services fees from Ant Financial. Alibaba settled a U.S. federal class-action lawsuit, which cost it $250 million U.S.
Active consumer additions will continue driving Alibaba’s growth. In Q2, it added 20 million annual active consumers. 70% of them come from less-developed areas. The company has two types of consumers to target: those in top-tier cities and the other group from the less-developed areas. In effect, Alibaba’s addressable market is vastly bigger as it targets a wide range of customers.
Alibaba’s platform has very dynamic supplies from branded products and products from manufacturers. GMV, which keeps growing, will eventually $1 trillion U.S. These strong numbers suggest more upside in Alibaba stock.
