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Alibaba’s earnings soar but CEO warns that coronavirus could be ‘black swan’

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Alibaba had a great quarter to close out 2019, with strong gains in revenue and earnings that topped analysts’ forecasts.

The Chinese e-commerce giant managed to post a revenue gain of nearly 40% in the three months to December 31, while earnings rose almost 50% from the same period last year.

But Alibaba sounded a note of caution about the start of this year because of the coronavirus. It said the outbreak is an ongoing concern, and that it is doing all it can to help Chinese consumers cope.

“In response to the coronavirus, we mobilized Alibaba ecosystem’s powerful forces of commerce and technology to fully support the fight against the outbreak, ensure supply of daily necessities for our communities and introduced practical relief measures for our merchants,” Alibaba chairman and CEO Daniel Zhang said in a statement.

“We will support our merchants to overcome this challenging time together,” Zhang added.

Zhang was even more circumspect on the conference call with analysts. He called the outbreak a “black swan event” that “is having significant impact on China’s economy and may potentially affect the global economy.”

Zhang added that the coronavirus “will present near-term challenges to the development of Alibaba’s business across the board.”

Shares of Alibaba fell 2% in early trading following Zhang’s remarks. Alibaba rival and Chinese search giant Baidu also dipped.

It’s been a volatile year so far for Alibaba shares and other big Chinese techs like Tencent due to coronavirus fears.

Shares are up nearly 4% in 2020, but it hasn’t been a smooth climb. Alibaba’s stock fell more than 2.5% in January before rebounding in the past two weeks. The Chinese government has been encouraging people to turn to online shopping as quarantine measures kept millions under lockdown.

Chinese consumers continued to spend big on the company’s Taobao and Tmall platforms at the end of last year. Alibaba said that it set a record for Singles Day, a Chinese shopping extravaganza that takes place on November 11.

But it’s unclear just how much of an impact the outbreak will have on Chinese consumers this quarter, said Hari Srinivasan, a portfolio manager with Neuberger Berman, which owns Alibaba stock.

“We still don’t know the extent of the damage,” Srinivasan said. He hoped that the slowdown would be relatively brief and that spending patterns will improve, much as they did for Alibaba following the SARS outbreak in 2003.

Srinivasan added he was encouraged to hear that Alibaba now has 711 million active consumers, an increase of 18 million from the prior quarter. He said this shows Alibaba is doing a good job of expanding beyond China’s big cities and is starting to reach less developed areas in the country.

And Alibaba’s cloud business, like that of rival Amazon, is also thriving. Alibaba Cloud revenue surged 62% from a year ago in the quarter.

Alibaba recently completed a successful secondary listing of its shares on Hong Kong’s stock exchange. The company said it raised $13 billion from the offering, adding to its considerable war chest.

Article Topic Follows: Biz/Tech

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