When e-commerce giant Alibaba (BABA) posted incredibly strong revenue growth, shares rallied by over 5% only to give it up and more the next day. What happened?
Alibaba posted revenue growing by 14% Y/Y to $32.29B. Non-GAAP EPADS of $2.40 was driven by its reorganization. It supported the share price by buying back $3.1 billion worth of shares in the quarter, using its continuously strong generation of free cash flow. The firm has plenty of cash to strengthen its competitiveness and capture new opportunities, expanding growth.
Instead of buying more, investors took profits on Aug. 11, 2023. Behind the backdrop is China’s real estate crash unfolding. China’s Country Garden failed to pay a mere $23 million in interest payment on its debt. It has 30 days to pay. This firm has more projects than the bankrupt Evergrande, albeit it has a smaller debt outstanding.
Markets anticipate the increasing pace of the economic slowdown will hurt Alibaba's sales. It will also force PDD (PDD) and JD.com (JD) to compete with Alibaba at the lowest price.
Looking ahead, Alibaba will split into smaller firms. Shareholders will get the cloud unit in stock distribution first. Alibaba’s Teemo and Taobao split will enable the firm to focus on lower-priced goods.
Alibaba’s weak share price suggests avoiding this stock. Wait for the profit-taking to end first.
