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Alibaba (BABA) Q4 Earnings Miss, Revenues Beat Estimates

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·6 min read
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Alibaba Group Holding Ltd. BABA reported fourth-quarter fiscal 2021 non-GAAP earnings of $1.58 per ADS, which missed the Zacks Consensus Estimate by 15.1%. Notably, the figure increased 12% year over year.

Revenues of RMB 187.4 billion ($28.6 billion), improved 64% from the prior-year quarter. Further, the figure surpassed the Zacks Consensus Estimate of $27.9 billion.

Top-line growth was driven by the solid momentum across its China commerce retail business, which includes the positive contribution from Sun Art, without which revenues would have exhibited growth of 40%.

Also, improving mobile monthly active users (MAU) in the China retail marketplace remained noteworthy. The figure stood at 925 million in the reported quarter, up 9.4% from the prior-year quarter. Additionally, annual active consumers in the same marketplace were 811 million in total, reflecting 11.7% year-over-year growth.

Apart from this, strength across the cloud computing business and Cainiao logistics services contributed well to top-line growth.

However, the imposition of huge amount of fine against the company’s monopolistic behaviour affect edits operational activities.

Alibaba Group Holding Limited Price, Consensus and EPS Surprise

Alibaba Group Holding Limited Price, Consensus and EPS Surprise
Alibaba Group Holding Limited Price, Consensus and EPS Surprise

Alibaba Group Holding Limited price-consensus-eps-surprise-chart | Alibaba Group Holding Limited Quote

Revenues by Segments

Alibaba has four reportable segments — Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives and Others. The details of the segments are discussed below.

Core Commerce (86% of total revenues): The segment comprises marketplaces operating in the retail and wholesale commerce spaces of China as well as international regions, logistic services and consumer services. The segment’s revenues for the reported quarter totaled RMB 161.4 billion ($24.6 billion), reflecting an increase of 72% on a year-over-year basis.

China commerce retail (66% of total revenues): The business vertical’s revenues for the reported quarter were RMB 123.2 billion ($18.8 billion), reflecting a year-over-year increase of 74%. Benefits from Sun Art consolidation were positives. Also, a spike in the average unit price per click, solid contributions from new monetization formats and strengthening online physical goods GMV on China retail marketplaces were other positives. All of these drove customer management revenues.

China commerce wholesale (2% of total revenues): The business generated revenues of RMB 3.4 billion ($514 million), reflecting a 21% increase from the year-ago quarter. The increase in average revenues from paying members on 1688.com aided revenue growth.

International commerce retail (5% of total revenues): The business’s revenues for the reported quarter were RMB 9.5 billion ($1.4 billion), increasing 77% year over year. The increase was driven by well-performing Lazada, AliExpress and Trendyol.

International commerce wholesale (2% of total revenues): The business generated revenues of RMB 3.9 billion ($598 million), which increased 59% from the prior-year quarter. This growth was attributed to a surge in the average revenues generated from paying members on the alibaba.com platform and revenues generated by cross-border-related value-added services.

Cainiao logistics services (5% of total revenues): The business generated revenues of RMB 9.96 billion ($1.5 billion), up 101% year over year. This was driven by a spike in the volume of orders fulfilled and growth in the average revenues per order from cross-border and international commerce retail businesses.

Local consumer services (4% of total revenues): The business generated revenues of RMB 7.2 billion ($1.1 billion), which increased 50% year over year.

Others (2% of total revenues): The business generated revenues of RMB 4.2 billion ($635 million), reflecting a 62% year-over-year increase.

Cloud Computing (9% of total revenues): The segment generated revenues of RMB 16.8 billion ($2.6 billion), up 37% from the year-ago figure, driven by increasing revenues from customers in Internet, public sector and finance industries.

Digital Media and Entertainment (4% of total revenues): The segment yielded revenues of RMB 8.05 billion ($1.2 billion), reflecting an increase of 12% on a year-over-year basis. This was attributed to the strong momentum across Alibaba Pictures and the online games business.

Innovation Initiatives and Others (1% of total revenues): Revenues from the segment were RMB 1.3 billion ($187 million), up 18% year over year.

Operating Details

In the fiscal fourth quarter, sales and marketing expenses were RMB 25.1 billion ($3.8 billion), up 3% year over year. As a percentage of total revenues, the figure expanded 300 basis points (bps) year over year to 14%.

Further, general and administrative expenses were RMB 27.7 billion ($4.2 billion), up 7% from the year-ago quarter. The figure expanded 700 bps year over year to 14% as a percentage of revenues.

Operating loss was RMB 7.7 billion ($1.2 billion)against the operating income of RMB 7.1 billion in the year-ago quarter.

Adjusted EBITDA increased 18% year over year to RMB 29.9 billion ($4.6 billion).

Balance Sheet & Cash Flow

As of Mar 31, 2021, cash and cash equivalents were $49.03 billion (RMB 321.3 billion), up from $47.8 billion (RMB 312.1 billion) as of Dec 31, 2020.

Further, short-term investments totaled $23.3 billion (RMB 152.4 billion) at the end of the fiscal fourth quarter, up from $22.1 billion (RMB 144.2 billion) at the end of the third quarter.

Additionally, the company generated $3.7 billion (RMB 24.2 billion) of cash from operations in the reported quarter compared with $15.8 billion (RMB 103.2 billion) in the previous quarter.

Alibaba’s free cash flow was a negative $100 million (RMB 658 million).

Guidance

For fiscal 2022, the company expects revenues of RMB 930 billion, considering the uncertainties related to the pandemic, intensifying competitive scenario and other macro headwinds.

The Zacks Consensus Estimate for fiscal 2022 revenues is pegged at $143.9 billion.

Zacks Rank & Stocks to Consider

Currently, Alibaba carries a Zacks Rank #5 (Strong Sell).

AutoNation, Inc. AN, Target Corp. TGT and Big Lots, Inc. BIGC are some better-ranked stocks in the broader Retail-Wholesale sector. While AutoNation sports a Zacks Rank #1 (Strong Buy) at present, Target and Big Lots carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for AutoNation, Target and Big Lots are pegged at 12.25%, 10.21% and 11.2%, respectively.

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