Alibaba shrugs off shaky Chinese economy with strong earnings

By Alex Valentine

Alibaba shrugged off a shaky Chinese economy and posted better-than-expected quarterly earnings and a jump in the number of mobile users.

Excluding certain one-time items, profit rose 34 percent from a year ago to $1.46 billion or 57 cents per share,  beating the analysts’ estimate of 53 cents.

Since the earnings release Tuesday morning,  Alibaba’s stock price has jumped nearly 8 percent. It closed Wednesday at $82.35.

Sales jumped 32 percent to $3.49 billion from a year ago. The company said the number of active buyers on Alibaba’s website increased 26 percent from a year ago, and the number of monthly mobile users jumped 59 percent.

“We are winning in mobile,” CEO Daniel Zhang said in a conference call with analysts Tuesday. “Mobile users are highly engaged and drive our online spending.”

While its online shopping subsidiary, Taobao, saw growth slow compared to the prior quarter, Alibaba’s overall quarter surpassed expectations.

Last week, China reported that its economy expanded by 6.9 percent in the third quarter, the slowest pace since 2009.  Analysts said Alibaba’s results were an opportunity to assess the state of the Chinese consumer.

“While uneven consumer sentiment appears to have affected Taobao, it had a negligible impact across the rest of the platform, with mobile monetization, (gross merchandise volume) growth, and cloud computing trends reinforcing the strength of Alibaba’s core business,” said Morningstar financial analyst R.J. Hottovy.

Alibaba also began offering same-day delivery services to several new cities in China this quarter.

Yahoo owns a 15 percent stake in Alibaba, which it says it plans to spin off in spite of failing to get an advanced tax ruling from the Internal Revenue Service. Yahoo saw its stock price increase 2.7 percent Tuesday.

Chief Financial Officer Maggie Wu said in the conference call that Alibaba anticipates further company growth for the remainder of the year, primarily by attracting farmers to  a mobile app that will allow them to sell products directly to consumers.

Photo at top: Employees’ bikes are parked outside of Alibaba in February 2014.(Leighklotz/Creative Commons)