Alibaba’s earnings seesaw

Hey Superheroes,

GameStop and AMC Entertainment soared this week after Keith Gill, aka “Roaring Kitty”, posted a series of tweets on X after a three-year long hiatus. They even made it to our top five most traded U.S. stocks this week! Yup, a couple tweets is all it took.

Aside from that, U.S. inflation data also came in yesterday. Both the ASX and Wall Street gained following the lower inflation rate announcement.

Here are this week’s stories.

Alibaba shares seesaw around its earnings release

On Monday it soared over 5%, on Tuesday it fell over 5% and this morning it closed at a gain of over 7%. Can you take a guess on what day it actually released earnings?

Answer: Tuesday morning AEST. 

So what’s happening with Alibaba?

📉 Big net income drop

Here’s how Alibaba performed compared to analyst expectations:

• Revenue: CN¥219.7B expected vs CN¥221.9B actual (↑1%)
• Earnings per American Depositary Share (ADS): CN¥10.24 vs CN¥10.14 (↓1%)

While Alibaba’s revenues beat expectations and even grew 7% year-on-year (YoY), earnings per ADS was slightly below estimates and was a decrease of 5% YoY. 

However the highly-watched number was Alibaba’s overall quarterly net income. 

It decreased by 96% over the year and is cited as the reason for Alibaba’s price plunge after it posted earnings. 

📝 But…

While that’s a shocking number, it was actually primarily due to Alibaba having to write down its investments in some publicly-traded companies. 

Excluding that, share-based expenses, impairment changes and a few other items, Alibaba’s net income dropped just 11%. Not the best, but not 96% either.

🔍 Experts are bullish

On the bright side, Alibaba’s report also showed promise. 

The diversified company recorded notable revenue growth for most of its segments:

• Alibaba International Digital Commerce (AIDC) was up 45% YoY, 
• Cainiao Logistics up 30% YoY, 
• Cloud Intelligence up 3% YoY,
• Taobao and Tmall up 4% YoY,
• and its Local Services Group up 19% YoY.

Additionally, Alibaba’s AI-related revenue experienced triple digit growth YoY.

Certain analysts, investors and Alibaba executives alike believe that the company is in a good position for future growth. 

While Alibaba’s share price fell straight after the report, its NYSE-listed stock is now up by more than 8% over the last week. 

🧠 Bonus: What is an American Depositary Share?

You may be wondering what an American Depositary Share (ADS) is. 

ADSs are basically shares in foreign companies (outside the U.S.) issued by U.S. depository banks like JP Morgan. The ADS generally provides its holders with rights to the foreign shares, such as receiving dividends and voting rights, however the custodian bank holds legal ownership of the foreign shares.

A few other examples of ADSs on Wall Street are Novo Nordisk (NYSE:NVO), Taiwan Semiconductor Manufacturing Co (NYSE:TSM) and AstraZeneca (NASDAQ:AZN).

🔦  Some other things we’re shining the Spotlight on:

• SUN SHINES ON SUN SILVER: Sun Silver (ASX:SS1), a silver miner, received a welcome debut on the ASX this week. Its flagship Maverick Springs project is based in Nevada and holds an estimated 292m ounces of silver. It’s now more than tripled its IPO price of A$0.20 per share.
• REDDIT OPENS UP TO AI: A couple months after its massive deal with Google, Reddit (NYSE:RDDT) has now signed another one with OpenAI. The social media platform will be bringing its content to ChatGPT while also becoming OpenAI’s advertising partner. Reddit shares gained over 10% following the news.
• NOVAVAX’S WELCOME DEAL: Novavax (NASDAQ:NVAX) shares more than doubled in the last week following the announcement of a US$1.2B deal with Sanofi. The deal values Novavax at ~US$1.4B, which nearly doubled its market cap of ~US$628M before the news.

That’s all for this week’s Spotlight! 

Keep up to date by following us on Instagram, @superheroau!