HONG KONG (BLOOMBERG) - Shares of Alibaba Group Holding surged more than 10 per cent on Thursday (June 8) after a monster sales forecast defied expectations that gains would slow by dint of a decelerating economy and its own sheer scale.
China's largest e-commerce company forecast 45 to 49 per cent revenue growth in the year ending March - a target that topped analysts' projections by 10 percentage points and drew "gasps of wow" from the audience at its annual investor day at its Hangzhou headquarters on Thursday
The outlook sustains a near-unbroken run of 40 per cent-plus annual rises and underscoring how Alibaba's investments into businesses beyond its bread-and-butter of online shopping are paying off.
The company's US shares rose 13 per cent to US$142.34, the most since September 2014 and a record high - sending Alibaba' market value up by US$42 billion.
As of Thursday's close, shares of Alibaba are up a whopping 62 per cent from a year ago.
Alibaba and Tencent Holdings, which dominate online shopping and social media respectively, have ventured deeper into new areas from cloud computing services to streaming music and video as the country's economy slows.
he online shopping giant founded by billionaire Jack Ma is capturing more digital advertising spending by incorporating social elements such as video in its shopping sites. To reflect an increasingly diverse customer base,
Alibaba will start reporting "active consumers" as opposed to just buyers, chief financial officer Maggie Wu said during the company's annual investor-day conference. It'll begin to disclose "customer management revenue" instead of just online marketing, to reflect a broader base of advertising platforms. The forecast compares with the 35 per cent average of estimates and surpassed the most bullish projection of the 43 analysts tracked by Bloomberg.
Alibaba is spending billions of dollars on new businesses in part to counter Tencent's increasing dominance of online social media and entertainment through WeChat, a messaging and networking powerhouse. Considered a barometer of Chinese consumer sentiment,
Alibaba has also expanded abroad since buying control of Lazada Group to establish a foothold in South-east Asia, potentially setting up a clash with Amazon.com. Its AliExpress site remains for now the main window through which it targets foreign shoppers.
While Alibaba has outperformed expectations, investors remain concerned about a deceleration in China's economy and similar efforts by Tencent to capture digital ad spending and muscle in on its turf. In response, Alibaba moved into untapped rural markets and explored new sources of income. Most of those new businesses are years away from contributing to the bottom line.
On Thursday, Wu said Alibaba will continue to sacrifice a small slice of profitability to help bankroll its forays. Cloud computing services in particular now account for about 5 per cent of overall sales. A service akin to Amazon's AWS that provides computing power over the internet, it's become one of the company's fastest-growing businesses and underpins other pieces of the Alibaba empire such as streaming and e-commerce. The priority remains expansion for now, she added.
"Profitability is still not the priority for our cloud business," Wu told investors. Alibaba wants to "quickly expand cloud leadership in coming quarters".
With additional information from CNBC