Alibaba's upgraded forecast boosts share price

BEIJING • Alibaba Group Holding added US$7.5 billion (S$10.6 billion) to its market value after reporting quarterly results that beat estimates and raising its full-year sales forecast.

China's biggest e-commerce company increased its projection for fiscal 2017 revenue growth to 53 per cent, from 48 per cent previously, as Chinese spending stays strong and the company wrings revenue from fledgling areas such as cloud computing, entertainment and search. 

That may help assuage investors concerned that a deceleration in the world's second-largest economy is curtailing Alibaba's main online commerce business.

Despite a fairly stagnant user base of about 443 million, Alibaba  benefited from a record Nov 11 Singles' Day spending spree. It gained a larger share of online advertising from rivals such as Baidu.

It also more than doubled sales from cloud computing in the December quarter.

As transaction growth slows, Alibaba is generating more revenue from merchants by selling them services to draw buyers, and expanding its Netflix-like entertainment arm.

"The growth is mostly coming from the strong performance in Alibaba's digital entertainment platforms, its ability to make money from cloud computing," said Ray Zhao, analyst at Guotai Junan Securities. "Investors will have a huge reaction to the revenue forecast raise."

Alibaba shares rose 3.1 per cent to US$101.43 at the close of trading in New York.

The company, which gets most of its revenue from its home market, wants to accelerate its globalisation efforts this year, chief executive Daniel Zhang told analysts on a conference call.

Other priorities include pushing deeper into rural China and pitting its burgeoning cloud business against the likes of Amazon and Microsoft. 

It is also spending enormous amounts to acquire Hollywood content to power its loss-making digital media division.

Mr Zhang, however, said the bleeding will slow as more paying customers come on board, given the company's ability to convert shoppers into viewers.

"Digital content will make up an increasingly large proportion of total consumption volume of young consumers," he noted.

Group sales rose 54 per cent to 53.2 billion yuan (S$11 billion) in the December quarter.

Adjusted earnings per share came to 9.02 yuan. Net income climbed 38 per cent to 17.2 billion yuan, also outstripping the 13.6 billion yuan average of estimates compiled by Bloomberg. 

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A version of this article appeared in the print edition of The Straits Times on January 26, 2017, with the headline 'Alibaba's upgraded forecast boosts share price'. Print Edition | Subscribe