Alibaba Q3 FY22 Earnings Highlights
[Rewards] Alibaba fought through obstacles and beat December earnings estimates
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KEY Figures:
● Alibaba's Q3 revenue was $35,921 million, a single-digit increase of 2% YoY (year-over-year).
● Net income was $6,633 million, an increase of 138% YoY, primarily due to a $3,225 million decrease in goodwill impairment in relation to the Digital media and Entertainment segment.
● Non-GAAP diluted earnings per ADS was $2.79, an increase of 14% YoY, and non-GAAP diluted earnings per share was $0.35, up 14% from the same quarter last year.
● Net cash provided by operating activities was $12,668 million, an increase of 9% compared to $11,652 million in the same quarter of 2021.
● For the 2023 Outlook, CFO indicated it would be a year of progress for Alibaba as China's economic activity will recover in 2023, catalyzing and stimulating a gradual consumption recovery.
● With generative AI's broad-based application, it's expected to see rapid growth in demand for high-performance computing power, which is an important opportunity for the company's cloud business.
More statistics:
KEY Points:
●For China Commerce, GMV generated on Taobao and Tmall, declined mid-single-digit YoY, mainly due to weakening demand and ongoing competition as well as the COVID-19 cases surge in this quarter. Whereas the impact was partially offset by accelerating growth for healthcare, fresh produce and pet care.
● BABA's International Commerce retail orders were up 3% YoY, primarily driven by the robust growth of Trendyol. In Southeast Asia, Lazada continues to improve monetization rate by offering value-added services and operations efficiency improvement.
● The company's Cloud Segment grew 3% YoY to $2,925 million, mainly due to healthy public cloud growth, partially offset by declining hybrid cloud revenue.
● During this quarter, Alibaba repurchased 45.4 million ADSs for approximately $3.3 billion. As of December 31, 2022, approximately $21.3 billion remained under the current authorization, effective through March 2025.
● The "Big Short" - Michael Burry's last 13F disclosure reveals he had established a sizable long position in Alibaba.
● The Covid-19 lockdown impacts may continue to linger, and it takes time before its powers launch on all cylinders.
The KEY in your hands:
By February 24, 2022, BABA shares had risen more than 1% since the beginning of 2023, behind the S&P 500 (.SPX), which was up about 4% during the same period (Source: moomoo APP).
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Detroit-view : I see Baba as a political play. substantially the government of China and the USA are itching for a confrontation. economic warfare may limit their upsides. so I see Baba as flat for next 6 to 8 months provided no more Covid lockdown.
doctorpot1 : Based on past data, the average length of a bear market to reach its bottom is 11 months, and China had crashed since July 2021 for 16 month now before the crazy recovery in Nov 2022.
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Since many of the negative overhang had been cleared such as clear sign of zero-zero covid policy, and clear signs that the tech crackdown is over by giving financial license to $Alibaba (BABA.US)$ ’s ANT Group. The worse might be over for China, and it could be the year of recovery for Chinese stocks.
There are still many potential positive news that may come and help Chinese stock to recover such as clearing of the US accounting audit, China GDP numbers to start recovering, and hopefully more bailout for their distressed property market.
I managed to get 1x$90 CALL option when $Alibaba (BABA.US)$ was at $90 and rallied up to $121 on worse financial data. Now with better financial data, i just grab another 1x$90 CALL option on BABA. Now I have 2x$90 CALL option that expires in 2024… just gonna sit back and relax, while waiting for BABA to churn out more good financial report quarterly
双瞳剪水的斯托达德 : Entity GMV on Taobao and Tmall declined in the middle single digits year over year in the December quarter (compared to a low single digit decline in the September quarter) due to weak demand and COVID-related logistics disruptions. Similar to the previous quarter, CMR declined 9% year over year due to higher returns (mainly COVID-related fulfillment disruptions).
For the March quarter, management. It indicates that as of the end of the Chinese New Year, GMV growth was worse than the December quarter (medium single-digit decline), but it has begun to recover and has resumed growth since the Lantern Festival (February 5). Additionally, the company expects the gap between GMV and CMR to close as logistics returns to normal. Overall, the company is confident of achieving CMR growth in 2023.
Ah keong : As a Chinese business sector, customer management revenue fell 9% year over year, mainly due to supply chain and logistics disruptions caused by shrinking consumer demand, continued competition, and a surge in COVID-19 cases in China, which led to Taobao and Tmall's online physical product GMV (excluding unpaid orders) falling in the middle of single digits year over year.
Direct and other revenue from Chinese retail businesses was RMB 74.421 billion, an increase of 10% over the previous year, mainly due to increased revenue from Hema and Ali Health's direct sales business. Among them, Hema's same-store sales achieved double-digit growth due to improved delivery and operational efficiency; Ali Health grew rapidly, mainly due to the sharp increase in healthcare demand brought about by COVID-19.
Obviously, Ali Health's paid growth depends on Coivd-19 for a certain period of time, and may be unsustainable. However, Alibaba-SW's core business Taobao and Tmall GMV recorded a decline of about 5%, partly affected by Covid-19; the intensification of competition is worth investors' attention. In particular, JD announced in early March that it would provide 10 billion dollars in subsidies, which may have the greatest impact on Pinduoduo, and Alibaba-SW cannot fight alone in this e-commerce price war.
阿姚朋友 : Core commodity revenue, due to fierce competition and pandamics. Due to demand, the pandemic, and supply chain disruptions. Taobao and Tmall, the former cash cow, experienced GMV and declining liquidity. As the main source of a company's cash flow, it has a great influence on a company's profit margin and free cash flow.
The pandemic has brought short-term uncertainty, yet competitors have also brought greater long-term pressure. The launch of Douyin's e-commerce page cannot constitute a shift in user habits in the short term, but the goal of becoming a “super app” is becoming more and more obvious.
Consumption began to recover in the March quarter. Although management expects GMV to still experience a mid-single digit decline in the fourth quarter, CMR expects positive growth in fiscal year 2023.
Other businesses. Direct sales increased 10%, mainly driven by Freshippo and Alibaba-SW Health. Driven by Trendyol, international commercial growth accelerated by 14 percentage points, up +18% year on year, and 7%/8% higher than Tiger/Street. Cainiao grew 27% year over year, 5%/6% higher than Tiger/Consensus because its strength came from domestic and cross-border business, and was mainly driven by service model upgrades in China. Local consumer services increased 6% year over year due to Ele.me's higher average order value.
The growth rate of Alibaba-SW Cloud continued to decline, increasing 3% year over year to RMB 20.2 billion. The public services sector declined significantly, but industrial consumption is expected to recover in the fourth quarter.
profit. Non-GAAP EBITDA is 6%/13% higher than TIGER/Street. Gross margin was 95 basis points/56 basis points higher than Tiger/Street. Looking at market segments, China's Ministry of Commerce's EBITA profit margin for the third quarter was 34%, compared with the same EBITA profit margin for consumer services compared to 24%, up from 41% a year ago. Cloud's EBITA margin is 2%. Rookie EBITA's profit margin increased to 0% from a year ago (1%). The overall EBITA margin was 21.0%, up 2.5 percentage points year over year, compared to +3.5 percentage points in the second quarter
Other highlights. The paid GMV of M2C products in Taobao transactions increased by more than 35% year-on-year. Freshippo achieved double-digit same-store sales growth. Trendyol orders grew strongly during the December quarter.
Estimated revisions. F4 Q earnings remained essentially the same. EBITDA fell 2% in the fourth quarter, and profit margins fell 31 basis points. Revenue remained largely unchanged in fiscal year 2014.
Valuation. Our target price of $120 (no change) is based on 14.6 x CY 23 E non-US GAAP earnings of $8.20 per share. Given the slowdown in revenue and profit growth, 14.6 times is 7 times lower than the five-year average of 22 times.
矜重的比尔 : Alibaba Cloud's revenue increased 3% to 20.08 billion yuan, with a profit margin of 2%. This is Alibaba Cloud's seventh consecutive quarter of profit. Although revenue growth has slowed sharply, considering the phased rise of state-owned cloud services and the continuing widespread decline in the TMT industry, on the one hand, we believe that the current situation is completely acceptable, and on the other hand, we have more confidence in the future.
If we are fully aware that Alibaba Cloud is essentially a scale-driven business, and that the foundation of scale is technology, then we have reason to believe that when state-owned cloud service providers acquire customers with lower technical requirements at this stage, they will continue to be on the side of cloud service providers such as Alibaba Cloud that have mastered core technology in the future. Because when these customers upgrade their service requirements in the future and have higher requirements for technology, service providers such as Alibaba Cloud will still be the first choice. New smart terminals centered on automobiles are surging, and data will explode under the Internet of Everything trend.
The advent of ChatGPT has further strengthened our confidence in Alibaba Cloud. Without the strong support of Microsoft's cloud service Azure, OpenAI would not be able to handle such technology and computing power requirements. Therefore, on the one hand, we are optimistic that Ali will develop domestic ChatGPT products. Even if this product does not appear in Ali in the end, its huge demand for data and computing will be significantly beneficial to Alibaba Cloud. Imagine that in the future, all kinds of software and hardware will probably be combined with ChatGPT products to generate voice input and output capabilities, then they will definitely have higher requirements for the cloud service providers behind them. At this time, the opportunities for service providers without deep technical accumulation are significantly reduced.
MonkeyGee Detroit-view : who do you think will win this economic warfare?
Sam62020 : alibaba is the market leader in china. although the ecomm sector is still fiercely competing, baba has a strong fintech offering. i see baba will continue to have a strong financial standing amd performance in the next 5 years
Kaka Tan : BABA should have never traded anywhere close to $100, let alone go below $100. It's just the financial press that created the gloom and doom environment that convinced a lot of people to sell/short as if Chinese stocks are going to zero. Now this is only the beginning of the reversal. $175 is a perfectly reasonable valuation of 20 P/E, which is where I think we're going this year and I am not selling a single share below.
MooMu : Gap filled and now on day low on 100 day moving average. Financial numbers were great, don’t get fooled. They push the stock down to make short term calls of retailers end worthless. At the moment the amount of outstanding calls is reduced, prices will spike. Just hold shares and you will be rewarded and these lows give a good opportunity for buying more.
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