Alibaba drops 4% after earnings release

US-listed shares of Alibaba Group (BABA.US) trades 4% lower in US premarket, following release of fiscal-Q3 2024 earnings report (calendar Q4 2023). While stock initially jumped around 5% in premarket trading, those gains were later erased. Let's take a quick look at the release!

Alibaba's core e-commerce business misses estimates

Earnings released by Alibaba for the quarter ended on December 30, 2023 turned out to be a disappointment. Company missed the total revenue estimate, mostly due to weaker-than-expected performance of its core domestic e-commerce business (Taobao & Tmall Group). This has weighed heavily on the results. Alibaba recorded growth in other business segments.

Weakness in Chinese consumer spending as well as exodus of Chinese shoppers to Alibaba rivals is a headache for the company and led to announcement of revitalization of the e-commerce segment. Company said that it will focus on reigniting growth in its e-commerce and cloud business.

Fiscal-Q3 2024

• Revenue: 260.35 billion CNY vs 261.25 billion CNY expected (+5.1% YoY)
  • Taobao & Tmall Group: 129.07 billion CNY vs 133.3 billion CNY expected (+2% YoY)
  • Alibaba International Digital Commerce Group: 28.52 billion CNY vs 27.2 billion CNY expected (+44% YoY)
  • Local Services Group: 15.16 billion vs 15.2 billion CNY expected (+13% YoY)
  • Cainiao Smart Logistics Network Limited: 28.48 billion CNY vs 25.78 billion CNY expected (+24% YoY)
  • Cloud Intelligence Group: 28.07 billion CNY vs 25.98 billion CNY expected (+3% YoY)
  • Digital Media & Entertainment Group: 5.04 billion CNY vs 5.8 billion CNY expected (+18% YoY)
  • Other: 47.02 billion vs 47.14 billion CNY expected (-7% YoY)
• Adjusted EBITDA: 59.57 billion CNY vs 57.27 billion CNY expected (+0.7% YoY)
• Adjusted net income: 47.95 billion CNY vs 47.99 billion CNY expected (-4% YoY)
• Adjusted EPS: 18.97 CNY vs 18.67 CNY (19.26 CNY a year ago)

Company boost buyback program by $25 billion

Alibaba Group also announced that it will boost its buyback program by $25 billion. Decision was already approved by the board of directors and, following the increase, the company has $35.3 billion available under buyback program through the next three fiscal years (until March 2027). Buyback announcement was what likely driven a 5% share price jump in US pre-market trading immediately after results were released. However, those gains were quickly erased and current pre-market quotes point to Alibaba launching today's Wall Street cash session around 4% below yesterday's cash close.

A look at the chart

Taking a look at Alibaba chart (BABA.US) at D1 interval, we can see that the price has recently managed to break above the downward trendline as well as 50-session moving average (green line). Stimulus hopes provided a boost for Chinese indices and US-listed Chinese stocks this week, allowing Alibaba stock to jump above the upper limit of the local market geometry. A break above the trendline, an important moving average and the local geometry strongly hinted that short-term downtrend may be over already and a period of gains looms ahead. However, a post-earnings pullback may put this thesis to the test.

Source: xStation5