Alibaba Group Holding Ltd (NYSE: BABA), China’s largest eCommerce firm, reported a 60% y-o-y growth in fiscal 2017 fourth-quarter revenues, compared to last year’s similar period. The Q4 revenues were above analysts’ consensus as well. However, the earnings missed the Wall Street estimates. Still, the strong growth in quarterly revenues ensured a new 12-month high for the share price. We expect the stock to forge ahead in the coming week due to the facts presented below. Alibaba ended Monday’s trading session at $124.75 in the NYSE.
The Hangzhou, China-based company reported fiscal 2017 fourth-quarter revenue of RMB 38.58 billion ($5.61 billion), up 60% from RMB24.18 billion in the final quarter of 2016. The Wall Street analysts had anticipated Alibaba to post revenues of RMB35.87 billion ($5.20 billion).
The Q4 2017 net income rose 85% to RMB9.85 billion ($1.43 billion), or RMB4.12 per share ($0.60 per ADS), from RMB5.314 billion, or RMB2.11 per share, in Q4 2016.
Total core commerce revenues increased 47% y-o-y to RMB31.57 billion ($4.59 billion) in the fourth quarter. In the previous quarter, core commerce revenues grew 45%. Cloud computing revenues were RMB2.16 billion ($314 million) in 4Q17, up 103% from RMB1.07 billion in the corresponding quarter last year. Digital media and entertainment revenue jumped 234% y-o-y to RMB3.93 billion ($571 million).
Excluding amortization of intangible assets, impairment of goodwill and investments, and share-based compensation expenses, fourth-quarter 2017 non-GAAP net income was RMB10.44 billion, or RMB4.35 per share ($0.63 per ADS), compared to RMB7.56 billion, or RMB2.99 per share in the same period last year. However, non-GAAP earnings missed the Street consensus of $0.66 per ADS (RMB4.53 per share).
At the end of fiscal 2017, the company had 454 million annual active buyers in the China retail market place. This compares with 423 million at the end of FY16. Mobile Monthly Active Users (MAUs) increased 24% y-o-y to 507 million at the end of fiscal 2017.
The company is expanding at a brisk pace outside China. Alibaba has successfully consolidated its position after acquiring Southeast Asian retail site Lazada, last year. The company has completed the integration of Hello Pay, the Singapore-based payment system of the eCommerce platform, with Alipay. In an attempt to expand the US merchant base, Alipay is hosting an event next month. The Board of Alibaba has also given the nod for a new $6 billion share repurchase program, which will replace the existing ones.
Thus, considering the strong revenue growth, eCommerce initiatives, and stock repurchase program, we expect the stock to remain bullish in the current quarter.
Technically, the stock has pulled back after hitting a low of 113.80. The momentum indicator continues to rise, while the money flow index is yet to reach the overbought zone. Thus, we foresee another round of uptrend in the stock price.
To capitalize on the analysis, we are planning to invest in a call option when the stock trades near 124 in the NYSE. To increase the odds of success, we would choose an expiry date that falls within the weekly time frame.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
