222.67 +0.53 (0.24%)
After hours: 7:59PM EST
|Bid||222.50 x 1200|
|Ask||222.20 x 800|
|Day's Range||220.75 - 223.56|
|52 Week Range||147.95 - 231.14|
|Beta (5Y Monthly)||N/A|
|PE Ratio (TTM)||63.52|
|Earnings Date||May 12, 2020 - May 17, 2020|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||250.99|
(Bloomberg Opinion) -- HSBC Holdings Plc is embarking on a radical overhaul while it continues the hunt for a permanent chief executive. For investors, the strategic muddle of this bizarre situation should be at least as troubling as the stinging cuts, $7.3 billion of charges and suspension of buybacks that the bank announced with its earnings Tuesday.The London-based lender will cut as many as 35,000 jobs, reduce gross assets by more than $100 billion by 2022, shave annual costs by $4.5 billion and slash the size of its investment bank in Europe and U.S. in the biggest raft of changes for years. All this will be overseen by Interim Chief Executive Officer Noel Quinn pending the appointment of a permanent successor to John Flint, who was ousted last August.Quinn was left to present the plan even as HSBC declined to confirm him in the job. This is bad on two levels. First, it undercuts the authority and investor confidence that Quinn might otherwise be expected to enjoy, should he eventually be appointed. At the very least, the delay signals that the board has harbored doubts about his suitability. Second, going ahead with the revamp may impede the search for a replacement.Any chief executive worth his or her salt will expect to put a personal stamp on the company. But the biggest decisions have already been made. This reshaping will have Quinn’s fingerprints all over it. That may narrow the options for HSBC Chairman Mark Tucker. Stephen Bird, Citigroup Inc.’s former top executive in Asia and the leading external candidate for the job, already has ruled himself out, the U.K.’s Sunday Times reported last weekend, citing unidentified sources.HSBC might argue that waiting wasn’t an option after years of sub-par performance. “Parts of our business are not delivering acceptable returns,” Quinn said in Tuesday’s statement. HSBC will shift resources to higher-returning markets, while squeezing the cost base and exiting some business lines. “The current strategy is in no man’s land,” as one investor told Bloomberg News pre-earnings.No one could accuse HSBC of sparing the knife this time. The job cuts are equal to about 15% of the workforce. They’re also an answer to those who, like this writer, have criticized the bank for being overly timid in the past. Still, the overhaul may end up exacerbating some of the vulnerabilities they seek to address.The restructuring makes the bank even more hostage to the fortunes of Hong Kong and mainland China, two economies struggling with slowing growth aggravated by the coronavirus outbreak. Hong Kong was already the source of 90% of HSBC’s profit in the third quarter. The city is going to become an even more glaring presence in its books.Besides an economy in recession, competition is getting tougher for HSBC in the city, as online lenders backed by Tencent Holdings Ltd. and Alibaba Group Holding Ltd. prepare to launch this year. Hong Kong’s dominant bank has also had to navigate political minefields, including being the target of the public ire last year after it closed an account linked to pro-democracy protesters.China, meanwhile, remains a challenge. HSBC is still struggling to extricate itself from Beijing’s bad books for providing U.S. prosecutors with information that led to the arrest of Huawei Technologies Co.’s chief financial officer in late 2018. And disruption to supply chains from the virus outbreak may lead to more credit losses, the bank has said.That means it’s going to take a long time before HSBC achieves the returns Tucker seeks. While 2019 adjusted pretax profit of $22.2 billion beat analysts’ estimates, HSBC’s fourth-quarter return on tangible equity was a mere 8.4%. That’s much lower than the more than 11% target it abandoned in October. Even its new goal of 10%-12% by 2022 looks unambitious beside the 18% return of JPMorgan Chase & Co. HSBC shares closed 2.8% lower in Hong Kong after the earnings, the biggest decline in more than a year.Ultimately, HSBC’s biggest risk may be that Quinn’s cuts cause the lender to double down on greater China just as growth in this part of Asia is uncertain. Outside CEOs won’t be clamoring to steer this ship. Quinn may just be stuck with the job. To contact the author of this story: Nisha Gopalan at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Apple Inc. has thrown out its March-quarter revenue guidance three weeks after providing it.Despite factoring in possible downside from the China coronavirus outbreak in its original forecast, the iPhone maker realized that things have deteriorated much more than it had anticipated. It gave no new figure and merely said the old one no longer applies, an admission that the company really can’t quantify the impact.While we should expect similar downbeat tones through the rest of the sector, this really means we should keep tabs on the one company that sits at the heart of the global technology supply chain: Taiwan Semiconductor Manufacturing Co.Apple is TSMC’s largest customer. When the chipmaker gave its own first-quarter and full-year forecasts Jan. 16, the world had barely heard of the disease now riveting its attention.Since then, Apple has shut stores in China and downstream assemblers like Hon Hai Precision Industry Co. have struggled to ramp up production after the Lunar New Year break amid continuing quarantines and a shortage of workers willing to return to the factory floor.Nvidia Corp., which designs graphics chips, is another major client of TSMC. On Feb. 13, it said the virus had cut its forecast by $100 million. That’s only around 3% of expected revenue for the quarter, but it all eventually adds up. Alibaba Group Holding Ltd., not a direct customer, forecast a decline in revenue from its core businesses as consumers on its e-commerce platform shy away from spending. At least some of those lost sales will be electronics products, which use chips made by TSMC.Chinese companies, including Huawei Technologies Co., accounted for 20% of TSMC’s revenue last year. With numerous enterprises in China on lockdown, adding to the squeeze on both demand and production, it’s unlikely such clients will be able to escape the impact.And last week, wireless industry association GSMA scrapped its annual Mobile World Congress scheduled for Feb. 24 in Barcelona because most of its major participants had already pulled out. This isn’t a consumer event, but the cancellation shows the breadth and reach of the outbreak’s impact on business. Whichever way you look at it, the global tech slowdown leads back to TSMC. Revising guidance mid-quarter isn’t without precedent, and TSMC usually does with a statement filed mid-afternoon Taipei time. It did so a year ago this week, cutting its sales and profit outlook after facing troubles with chemicals used in the manufacturing process. The result was a 10% reduction in operating profit. Just a few months before that, a production hiccup caused by a computer virus in its equipment hurt gross profit by around 5%. An earthquake four years ago sliced operating income by about 7%. The biggest mid-quarter guidance cut I could find is the 25% hit to operating profit that it took in December 2008 as the financial crisis brought the world economy to a halt.To be sure, it’s not certain that a cut will be necessary this time. Clients may decide that they want to keep building up inventory of the chips that come out of TSMC’s factories. But at some point, end-demand may dictate a more cautious approach to procurement. This epidemic is proving hard to quantify, so TSMC’s biggest challenge may not be whether to revise guidance, but what new number to give. To contact the author of this story: Tim Culpan at firstname.lastname@example.orgTo contact the editor responsible for this story: Patrick McDowell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- SoftBank Group Corp. became vulnerable to activist attack by Elliott Management Corp. because of the harmful noise generated by the Japanese technology investor’s giant Vision Fund. That noise just won’t die down.Sunday brought a report in the Financial Times that Vision Fund head Rajeev Misra is looking to raise a multi-billion dollar fund to buy listed stocks. The blueprint was established last year with SoftBank’s investment in controversial German payments company Wirecard AG via a convertible bond. The new plan looks like a bid to do more unconventional equity investments in the same vein.The development marks a strategic departure. After all, the $100 billion Vision Fund was established to take stakes in private, tech-focused startups. SoftBank has already had to deny that there’s a “misalignment” between Misra and the group’s founder and Chief Executive Officer Masayoshi Son over the idea of investing more in public companies. But it’s not hard to see why Son, and other SoftBank shareholders, might need persuading.Setting up a listed-equity vehicle would bring in new revenues from management and performance fees. It could also create capital gains (or losses) from any investments in the fund that are made using SoftBank’s own capital. Whether it would make such commitments — and the decision-making around any such moves — is unclear. The FT said funding of about $4 billion is being lined up from sovereign funds in Abu Dhabi and Kazakhstan.There is some logic to Misra’s idea. It would, theoretically, marry SoftBank’s nous in emerging technology with the experience in trading and structured products possessed by a bunch of former bankers working for the Vision Fund. The result could bring a new dimension to SoftBank, similar to how the American buyout giants have become purveyors of real-estate, private-equity and credit strategies.The numbers being spoken of may be small relatively. But SoftBank’s core competence is in a specific sector, technology, and a specific category, late-stage venture capital. It needs to be crystal clear about why it would have an edge in the listed markets. The new offshoot would engage in financial engineering by wrapping listed investments in leveraged structures. But would it be looking to hire people or engage advisers with that expertise in a public-equity strategy if it didn’t already have it on the payroll? Or is the tail wagging the dog?SoftBank shares trade at a near 60% discount to net asset value, hence Elliott’s interest. That’s due largely to high-profile mishaps in the Vision Fund, such as WeWork, even though the fund still accounts for only a 10% slice of SoftBank’s overall managed assets. The risk is that, as with the Vision Fund, this venture has an outsized impact on sentiment toward SoftBank overall.Ironically, SoftBank has a huge opportunity already to dabble in the stock market and do financial engineering. The discount at which its shares trade means it could buy nearly $50 billion of underlying investments by spending $20 billion on its own stock. Son could fund such a buyback either by raising debt or selling some of SoftBank’s shares in Alibaba Group Holding Ltd., Sprint Corp., telecoms subsidiary SoftBank Corp. or even chipmaker Arm Holdings via a public offering. Maybe the brains in the Vision Fund could start by identifying which of these levers to pull.To contact the author of this story: Chris Hughes at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alibaba Group's communication app DingTalk has begged China's school students to stop venting anger on the software after they gave it poor grades when made to use it to attend online classes. Millions of Chinese are stuck at home because of the coronavirus outbreak, which has killed 1,770 so far in mainland China. Authorities shut schools until at least the end of February to try to stop the spread of the virus and many school students were hoping for an extended holiday.
China's government is enlisting the help of Alibaba Group Holding Ltd and Tencent Holdings Ltd to expand colour-based systems for tracking individuals affected with the coronavirus nationwide. On Wednesday, Alipay, the payment app operated by Alibaba's financial division Ant Financial, released a feature in collaboration with the government that assigns a coloured QR code representing the health of residents in Hangzhou. Users in the city fill out an online form reporting their ID number, whether they have travelled outside Hangzhou recently, and any symptoms they might have that suggest an illness, such as fever or a heavy cough.
Alibaba issued its latest earnings report yesterday, and the Chinese eCommerce giant reported that cloud revenue grew 62 percent to $1.5 billion U.S., crossing the RMB10 billion revenue threshold for the first time. Alibaba also announced that it had completed its migration to its own public cloud in the most recent quarter, a significant milestone because the company can point to its own operations as a reference to potential customers, a point that Daniel Zhang, Alibaba executive chairman and CEO, made in the company's post-earnings call with analysts.
Alibaba Group Holding's (BABA) fiscal third-quarter 2020 earnings are driven by steady improvement in core commerce and strong cloud business.
(Bloomberg) -- Sign up for Next China, a weekly email on where the nation stands now and where it's going next.China’s highest-flying technology startups are struggling to stay afloat after the coronavirus outbreak threatened to paralyze critical venture capital funding.Investment in an industry that runs on face-to-face contact and gut instinct has fallen off a cliff since the epidemic erupted in January. Venture capital funds slashed startup investment by 60% in January from a year ago, London-based consultancy Preqin estimates. That’s because angel investors and venture capitalists accustomed to road-testing new technology or grilling entrepreneurs in person now shun interaction and work from home.China’s tech industry -- which prides itself on honing online communications from social media to mobile payments -- is thus ironically stumbling thanks to the lack of the most basic forms of human contact. If the situation persists -- and there are few signs that stringent nationwide quarantine measures will unwind soon -- that jeopardizes a swath of the millions of startups that collectively represent an important growth driver for the world’s second largest economy. It’s a double-whammy for an industry that in 2019 grappled with volatile capital, a slowing economy and U.S.-Chinese tensions.Read more: China’s 58 Home Is Said to Delay U.S. IPO as Virus Hurts Demand“As an entrepreneur who went through SARS in 2003, I fully understand the challenges entrepreneurs face,” Neil Shen, the founding partner of Sequoia Capital China, said in a statement. “We will fully stand by to provide help and support to the companies we backed in any way possible,” said Shen, regarded by many as one of the country’s most prominent tech investors.Read more: ‘Nightmare’ for Global Tech: Virus Fallout Is Just Beginning (3)A backlash against China’s tech champions in 2019 had begun damping a decade or more of go-go optimism and investment that fueled one of the fastest and largest creations of wealth the world has seen. Trade curbs imposed by Washington soured investor interest, suppressing deal flow. On a global stage, WeWork’s implosion fanned caution around potentially overblown tech valuations. The euphoria that created more than 100 unicorns, or billion-dollar firms, in China dissipated toward the end of last year.The outbreak was the last thing China’s tech sector needed.“This hasn’t been the start to the year of the rat that China was hoping for,” said Ee Fai Kam, head of Preqin Asian operations, adding that the setback is “coming on the back of a bruising 2019 when trade and tech tensions with the U.S. caused investors to exercise an abundance of caution.”Following the Lunar New Year break, some of the country’s most prolific investors – including those at Matrix Capital and Genesis Capital -- confined themselves to home, calling off meetings and mothballing visits to companies. “A lot of our projects require on-site due diligence and we are wary to push forward deals without it,” explained Snow Hua, a managing partner at Cherubic Ventures.Others are trying to engage and mitigate the damage to their existing portfolio companies through virtual conference calls. Sequoia China is planning to organize two investment sessions for early-stage startups via the conferencing service Zoom. As of Wednesday, investors from more than 50 venture capital houses had signed up.At the same time, red-hot sectors from artificial intelligence to ride-hailing and online property are reeling. On Thursday, China’s largest company by market value, Alibaba Group Holding Ltd., warned of a significant hit to revenue growth in the March quarter from an epidemic that’s wreaking havoc across broad swathes of the Chinese economy. Didi’s daily active users fell 54.1% on Jan. 27 compared with Jan. 16, before the Lunar New Year break, according to data compiled by Aurora Mobile Ltd. Read more Alibaba Warns Virus Having Broad Impact on Chinese EconomyEven those benefiting from a short-term spike in orders -- such as online grocery delivery firms -- are wary of longer-term fallout. 58 Home, the maid and home-maintenance service owned by a Chinese Craigslist equivalent, is said to have delayed its planned U.S. initial public offering after the coronavirus outbreak crippled customer demand. Others such as Uber-backed Didi Chuxing or rental startup Danke may begin to suffer as the capital winter drags on.“It’s going to be a tremendous challenge for a lot of startups,” said Wang Jun, chief financial officer for fresh produce delivery firm Missfresh. “It’s winter time for capital flow, and companies need to produce blood on their own to become cash-positive.”Read more: Coronavirus Outbreak Drives Demand for China’s Online Grocers(Updates with data on Didi’s fall in daily active users in ninth paragraph)To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Candice Zachariahs at email@example.com, ;Peter Elstrom at firstname.lastname@example.org, Edwin Chan, Jonas BergmanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- 58 Home, the maid and home-maintenance service owned by China’s Craigslist equivalent 58.com Inc., has delayed its planned U.S. initial public offering, according to people familiar with the matter, as the coronavirus outbreak cripples customer demand.The company’s pre-IPO financing round -- a private fundraising effort that started late last year -- also hasn’t been completed, said the people, who asked not to be named because the information is private. The IPO had been expected to take place in the first half of the year.Shares of 58.com Inc. fell 4.9% in New York trading, the biggest decline since September.The 58 Home’s move adds to the list of IPO setbacks amid the virus outbreak. Restaurant operator Daikiya Group Holdings Ltd. on Wednesday canceled its first-time share sale in Hong Kong, while Chinese biotech firm InnoCare Pharma Ltd. has postponed investor meetings for its planned listing in the financial hub.Read: Virus Hits World’s No.1 IPO Market as Investor Meetings ScrappedThe virus has killed at least 1,355 people in China as of Thursday. People across the nation have been minimizing personal contact for fear of contracting the disease, hurting 58 Home’s on-demand services including part-time cleaners and home handymen.“Obviously, the virus outbreak has affected home and cleaning services -- that entire sector has almost been brought to a standstill,” 58 Home said in a statement. “Our short-term revenue will be affected.”The firm declined to comment on its IPO and fundraising plans.The company added it is facing a severe shortage of maids, and 30 million people in the home and cleaning-services sectors could lose their jobs if the outbreak continues.Workers StrandedMany workers are still stranded in their hometowns, where they traveled for Lunar New Year celebrations, and haven’t been able to return to major cities after the authorities curtailed travel to try to contain the virus.To ensure the health of maids who work on its platform, 58 Home has been logging their travel history, and offering masks and temperature checks.Locally known as 58 Daojia, the company has been seeking funds to bankroll an expansion into China’s competitive online services arena. It was aiming for a valuation of as much as $2 billion in a U.S. IPO.58 Home is one of China’s leaders in helping people connect online with services from flower delivery to home cleaning. Backed by Tencent Holdings Ltd., it’s vying against deeper-pocketed rivals such as Meituan Dianping and businesses operated by e-commerce leader Alibaba Group Holding Ltd. All are targeting a slice of a market for physical, on-demand services that are being disrupted by online technology.58.com’s unit raised its last private funding round in 2015, garnering $300 million from investors including Alibaba, KKR & Co. and Ping An Group. Parent 58.com holds 68.8% of the company’s equity interest but doesn’t consolidate the unit’s financials in its own results, according to its annual filing.(Updates to add 58.com Inc. share price in third paragraph)To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at email@example.com;Dong Cao in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Candice Zachariahs at email@example.com, Peter Vercoe, Fion LiFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Alibaba Group Holding Ltd. warned that the coronavirus responsible for killing more than 1,300 people in China is exerting a fundamental impact on the country’s consumers and merchants, and will hurt its revenue growth in the current quarter.Alibaba, the first major Chinese technology corporation to report results since the epidemic emerged in January, said the virus is undermining production in the economy because many workers can’t get to or perform their jobs. It has also changed buying patterns with consumers pulling back on discretionary spending, including travel and restaurants.The Chinese e-commerce giant made the comments after reporting strong financial results for the quarter that ended in December. Revenue surged a better-than-expected 38% to 161.5 billion yuan ($23.1 billion), while net income rose 58% to 52.3 billion yuan.But Chief Executive Officer Daniel Zhang and Chief Financial Officer Maggie Wu were clear about the fallout from the deadly virus on employees, suppliers and merchants. Many merchants that work with the company have not been able to return to normal operations because of a shortage of employees. Alibaba’s U.S.-listed shares slid 1.8% Thursday.“The epidemic has negatively impacted the overall China economy, especially the retail and service sectors,” said Wu in a conference call after the results. “While demand for goods and services is there, the means of production in the economy has been hampered by the delayed opening of offices, factories and schools after the Lunar New Year’s holiday.”Asked about the affect on Alibaba, she voiced caution about giving estimates because it’s only halfway through the March quarter.“Overall revenue will be negatively impacted,” she said, adding that the hit to growth could be “significantly” negative.Zhang said that they are seeing relatively large changes in buying patterns. While food delivery is growing, areas like clothing and electronics are running into logistical problems. He warned that the core e-commerce business suffered a negative impact in the first two weeks after the holiday. Restaurant orders and travel bookings have also taken hits, hurting its Ele.me delivery and Alitrip businesses..“It will present near term challenges to Alibaba’s businesses across the board,” he said on the conference call, adding that there will also be opportunities.Alibaba is rolling out special programs to support merchants, including lowering the fees it charges and providing subsidies for delivery personnel. Zhang said the company is trying to keep its own staff safe, including having many work from home.Zhang said that more workers are going back to work in Beijing, Guangzhou and Shenzhen. Many logistic companies are also recovering their capacity in the past 12 days.China’s economy -- which had been showing signs of stabilization after a rough year buffered by the U.S. trade war -- has been hammered by the virus and measures to prevent its spread. Economists have been lowering their growth forecasts for the first quarter and the full year with factories shuttered, supply chains disrupted and consumers reluctant to go outside for fear of contagion.Bloomberg Economics’s scenario analysis suggests China’s first-quarter GDP growth could slow to 4.5% year on year -- a record low. “If that happens, a period of weaker imports will transmit the shock to trade partners,” according to Chief Economist Tom Orlik.Already, China’s most valuable corporation has struggled to sustain growth rates during an economic slowdown in its home market. While widespread home confinement is spurring demand for online services from grocery delivery to office apps to streaming entertainment, the disease is snarling nationwide transport and threatens in the long run to dent the consumer spending Alibaba depends on.The disruption to Alibaba’s business from the virus “may be worse than feared,” wrote Bloomberg Intelligence analysts Vey-Sern Ling and Tiffany Tam in a report. “Alibaba’s sales may contract in its core China retail marketplaces and local services business in the coming quarter even if the coronavirus outbreak subsides, as logistic and production disruptions faced by merchants could take time to resolve.”This week, the company declared a waiver of some service fees for merchants on its main direct-to-consumer Tmall platform to help those struggling with the fallout from the outbreak. That may further depress the top-line in 2020.“It was always thought that Alibaba’s core commerce revenue would have the brakes applied to it either because of China’s macroeconomic condition, or slower user growth,” said Michael Norris, research and strategy manager at Shanghai-based consultancy AgencyChina. “But what this coronavirus event forces us to do is to consider a third scenario -- where Alibaba’s revenue will take a hit from a reduction in merchant fees and advertising spend.”Alibaba has shed 1.4% of its value since a broader Chinese selloff began in January, underperforming arch-rival Tencent Holdings Ltd., which as a mobile gaming and social media operator is better shielded in the short run from the epidemic.Read more: Coronavirus Outbreak Drives Demand for China’s Online Grocers(Updates with analyst comment in penultimate paragraph)\--With assistance from Malcolm Scott.To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.org;Kari Lindberg in Hong Kong at email@example.com;Zheping Huang in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin Chan, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Coronavirus updates send stocks down. Big Tesla news. Earnings results from the likes of Alibaba. What to expect from Nvidia. And why Perion Network Ltd (PERI) is a Zacks Rank 1 (Strong Buy) stock right now...
An overnight spike of nearly 15,000 in China’s reported coronavirus cases upended world markets on Thursday.
(Bloomberg Opinion) -- Investors looking at Alibaba Group Holding Ltd. earnings on Thursday are rightfully examining the March quarter outlook and parsing every word for clues about how the coronavirus outbreak will impact the Chinese company. It’s not pretty.Chief Financial Officer Maggie Wu told investors that the company’s China retail and local consumer businesses would be hit hardest. Both will bear the brunt of reduced demand and the challenge of delivering products. Customer management revenue and commissions will most likely decline, she said.This is a huge revelation.Those two divisions combined accounted for 52.4% of revenue in the December quarter. If their sales fall, China’s largest company could post its first revenue decline on record.(1)It’s also possible that other businesses, such as cloud computing and fresh food delivery, will pick up the slack, but there’s no guarantee.Chief Executive Officer Daniel Zhang described the epidemic and resulting widespread quarantine as a Black Swan event. The message: This will hurt, but it will be a one-off.Yet investors ought to examine the December quarter because it gives clues about how the e-commerce giant was faring before the COVID-19 virus appeared on the scene. Although revenue continued to grow at a respectable 38%, that was the slowest in almost four years and the smallest beat against estimates in at least a year. Its earnings-per-share beat was the slimmest in more than a year.Importantly, its bread-and-butter core commerce business, which accounts for 88% of sales, continues to weaken. This division was propped up by acquired units in the physical retail space. Stripping those out, customer management (advertising) revenue and commissions combined climbed 21%, almost 4 percentage points slower than the prior quarter and 5.5 percentage points less than a year ago. Bear in mind, the December quarter includes Alibaba’s big Nov. 11 Single’s Day bonanza, which is supposed to push revenue skyward. Clearly, this event is losing its luster. So that was all happening when the coronavirus burst onto the scene.Among the numerous problems Alibaba faces is a delay in employees returning to work after the Lunar New Year break, which was underway when the outbreak struck. This means that merchants can’t ship orders, leaving a significant number of packages undelivered. Trips made through its travel business have been canceled — with the company offering full refunds — and restaurant bookings are down. Orders for fresh food delivery have increased, though. Beyond that, the company has to bear the costs of what is best described as being a good corporate citizen. Its fintech business, Ant Financial, is waiving or cutting interest rates on loans, and executives have elected to offer subsidies to delivery personnel. It’s also making direct and indirect donations — including 469 million yuan ($67 million) in supplies it procured from around the world — and ramping up free services it already offers such as the DingTalk communications app, which is being used in online education and work-from-home situations. Executives did their best to turn lemons into lemonade. More people are integrating digital technologies into their daily lives — more than 150 million daily health check-ins have been recorded on DingTalk — and Alibaba’s ability to deliver food and supplies at the height of this emergency could make the company even more indispensable in people’s daily lives once the dust settles.If that optimistic view of the crisis plays out, then Alibaba might bounce back stronger than ever. But investors shouldn’t ignore the fact that the business was already becoming weaker before the Black Swan arrived.(1) Records begin Fiscal 2013 when the company listed in New YorkTo contact the author of this story: Tim Culpan at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Investing.com - Our Senior Analyst Jesse Cohen gives us his top five things to know in financial markets on Thursday, February 13, including:
Alibaba is using its 'forces of commerce and technology to fully support the fight' against the coronavirus outbreak.
CEO Daniel Zhang said the delayed return to work following the Lunar New Year, due to the virus outbreak which has killed more than 1,350 people in China and infected thousands more, had caused problems for merchants and delays in fulfilling orders. Finance chief Maggie Wu said most of Alibaba's businesses that rely on the sale of physical goods would likely see a decline in revenues this quarter. Despite the downbeat forecast, Zhang said that as of Monday Alibaba had observed more people in large cities going back to work and logistics networks returning to normal operations.
Here's what you may have missed on IBD Live this week amid strong earnings from companies like Nvidia, Alibaba, and Canopy Growth.
Alibaba beat forecasts in the third quarter. That's thanks to another record Singles' Day shopping extravaganza. The company says the November event generated over 38 billion dollars in sales. It's the biggest online shopping event of the year, far eclipsing Black Monday and the like. That helped sales at Alibaba's core commerce unit jump by almost 40%. The Chinese giant runs e-commerce sites Taobao and Tmall. It makes most of its money selling advertising and promotional services to merchants that list there. But it's not immune to coronavirus worries. Alibaba says it's introducing relief measures for its vendors. That includes almost 2.9 billion dollars in loans to Chinese firms. Cloud computing is Alibaba's other big moneymaker. Revenue from that unit jumped 62% to about 1.5 billion dollars.