HONG KONG (BLOOMBERG) - Alibaba Group Holding forecast sales growth that topped every analysts' estimate, defying expectations that growth must 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, sustaining a near-unbroken run of 40 per cent-plus annual rises and underscoring how investments into businesses beyond its bread-and-butter of online shopping are paying off. The company's German shares rose as much as 5.2 per cent.
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. The online shopping giant founded by billionaire Jack Ma is capturing more digital advertising spending by incorporating social elements like 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 on Thursday (Jun 8). It will begin to disclose "customer management revenue" instead of just online marketing, to reflect a broader base of advertising platforms.
"Its market valuation has fallen behind Tencent's recently, so the forecast could inject some confidence," said Ray Zhao, an analyst at Guotai Junan Securities. "This will be good news for its share price, which could rise 6 to 7 per cent based on this forecast," he added without specifying a timeframe.
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 SA to establish a foothold in South-east Asia, potentially setting up a clash with Amazon.com Inc. 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, Ms 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 has 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," Ms Wu told investors. Alibaba wants to "quickly expand cloud leadership in coming quarters".