Alibaba shares surge after forecast

NYSE-listed Alibaba's shares skyrocketed 13.3 per cent during Thursday's trading. The shares continued their rise again yesterday morning.
NYSE-listed Alibaba's shares skyrocketed 13.3 per cent during Thursday's trading. The shares continued their rise again yesterday morning.PHOTO: REUTERS
NYSE-listed Alibaba's shares skyrocketed 13.3 per cent during Thursday's trading. The shares continued their rise again yesterday morning.
Jack Ma

Buying frenzy on revenue prediction of 49% drives Jack Ma's net worth up

Alibaba Group's market value swelled by more than US$42 billion (S$58 billion) in one day after the Chinese e-commerce giant predicted that sales could grow as much as 49 per cent this year.

The stunning guidance was delivered from the group's Hangzhou headquarters at its annual investor day on Thursday.

It smashed consensus estimates for 35 per cent revenue growth and upended the notion that growth gets tougher the larger you get.

Investors swung into a buying frenzy. NYSE-listed Alibaba's shares skyrocketed 13.3 per cent during Thursday trading, while group founder Jack Ma's net worth surged US$2.8 billion overnight. The shares continued their rise again yesterday morning.

Mr Ma, 52, is now the richest person in Asia and the 14th wealthiest in the world with a net worth of US$41.8 billion, based on Bloomberg estimates.

At last year's investor day, Alibaba released sales forecasts for the first time, promising a 48 per cent revenue growth. It over-delivered.

  • No. 1 Alibaba Group founder Jack Ma's ranking among Asia's richest people. His net worth is US$41.8b.

  • No. 14 Ranking of world's richest people.

In the year ending March 31, it reported a revenue of US$23 billion, a jump of 56 per cent from the year before. If not for the consolidation of Singapore-based Lazada and video site Youku, revenue would have grown 45 per cent.

Analysts attending the investor day were given plenty of grist to go bullish on Alibaba.

The spotlight was shone on its recently launched Brand Databank, a centralised customer data platform that gives brands and merchants feedback on their marketing campaigns and helps them spot trends in consumer behaviour.

"The key is analytics. Alibaba platforms allow the company to know its users and customers inside out, more than other companies. That's what the sellers are willing to pay for," wrote Maybank Kim Eng analyst Mitchell Kim in a note.

Some 10 million small merchants use Alibaba's platforms every day and 75 per cent of Forbes' top 100 global brands now have storefronts, he added.

User engagement on the constantly evolving Taobao social commerce app is also rising. The average user opens the app eight times a day and placed 89 orders in the last fiscal year, Mr Kim said.

But China's e-commerce boom cannot last forever and Alibaba has voiced its ambition of becoming a global business. South-east Asia is set to be the next stage on which the Chinese giant clashes with American rival Amazon, which is expected to enter Singapore this year.

At the end of last month, Amazon made headlines when its shares climbed past the US$1,000 mark. It has a US$483 billion market cap, versus Alibaba's US$360 billion.

At a tech conference in Hong Kong yesterday, billionaire venture capitalist Yuri Milner, an early backer of Alibaba, Facebook and Twitter, said a surge in online consumer spending globally in coming years will create US$4 trillion worth of new Internet companies by the middle of the next decade.

In eight years' time, the rest of the world will match the current online spending trend of China, he added.

A version of this article appeared in the print edition of The Straits Times on June 10, 2017, with the headline 'Alibaba shares surge after forecast'. Print Edition | Subscribe