Alibaba Shares Mobilize As Chinese Consumer Holds Strong

In the wake of strong earnings buoyed by mobile shopping, Alibaba investors can breathe a sigh of relief. By and large it looks like the Chinese consumer is still loosening the purse strings.

With the exclusion of a number of one-off items, the eCommerce giant earned $0.57 a share, three pennies better than the Street anticipated in the September quarter. Revenues were also better than expected at $3.5 billion, up 32 percent year over year and better than analysts had seen at $3.4 billion. The growth, management said on the call, was mainly due to the 35 percent growth across China-focused platforms. Management also noted that it expanded its rural footprint in the quarter by 4,000 additional villages.

[bctt tweet=”In the wake of strong earnings, buoyed by mobile shopping, Alibaba investors can breathe a sigh of relief.”]

That stands in positive, and stark, contrast to the third quarter growth China saw as a whole in the third quarter, at 6.9 percent, which is the lowest level seen since the financial crisis.

Among some key metrics for Alibaba: the gross merchandise volume, defining the sales that move across the company’s digital platforms, were up 28 percent from last year, but the standout was mobile revenue, which more than doubled over the same period, and stood at $1.7 billion, and was 60 percent of gross merchandise volume.

That doubtless cheered investors, who sent the shares up 4 percent on the day and who also found sanguine data in the fact that the company sported a monetization rate (which translates into the amount it makes from its platform sales) was 2.4 percent, higher both sequentially and more than a year ago. The mobile monetization rate was even better, up at 2.4 percent in the most recent quarter and a far sight better than 1.9 percent last year.

Management said in the latest call that the growth in mobile may indicate that mobile shopping will be on par, and in time better than, the best years that were seen across desktop purchases. One near term key for mobile spending will come in November, when Singles Day will bow with lots of discounting among retailers – and for Alibaba, a continued push into cross-border transactions. International commerce was up 15 percent year on year.

Looking back at China, executive vice chairman Joe Tsai said that despite the economic slowdown, the twin consumer engines of wage growth and savings would help sustain buying power. And, as Alibaba CEO Daniel Zhang said on the call, the fact remains that only 10 percent of retail shopping is done online in China.


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