Chief Market Analyst at Scope Markets Joshua Mahony speaks to CGTN Europe about the factors that contributed to the company's latest earning figures.
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00:00 Let's talk to Joshua Mahoney, who's Chief Market Analyst at Scope Markets. Good to see you again, Joshua.
00:05 So, despite some positivity, these results actually missed expectations, didn't they? What do you make of them?
00:12 Yes, well, we came into this actually looking for a potential 5% pop to the upside,
00:19 because many people saw the earnings side of things as being better than expected.
00:24 But ultimately, the wider downtrend and sell-off that has been in play really looks to continue.
00:31 The stock is now down 6%. In terms of revenues, we see them continue to grow, but grow at a slower rate.
00:38 Now, 5% year-on-year. If you look back to the second quarter, that was 8%. The quarter before that, that was 14%.
00:45 So, we really started to see that growth shrink in terms of revenues.
00:49 The core part of the business, Taobao and the Tmall product, only up 2% in terms of revenues.
00:55 Cloud up 3%, although we're seeing some improved margins, so there's some positivity on that front.
01:00 Logistics up 24%. Those are the main parts of the business.
01:05 Certainly, the strong side of it was the international business, which, albeit smaller, is growing at 44% in terms of revenues.
01:13 But, like you said, the big ticket item is that big share buyback, $25 billion.
01:18 That, added on to what we were looking at previously, totals a $35 billion share buyback.
01:23 That's roughly 18% of the stock being bought back over the course of the next three years.
01:28 But it seems like markets really just aren't particularly impressed by the relatively slow growth of their revenues.
01:35 So, let's talk about this slowing growth in revenues, then. What's that about?
01:39 Is it consumer confidence? Is it just people buying less?
01:44 Well, in part, it's a story around about the fact that this is a massive company.
01:49 Generally, it's very difficult for a company like this to continue to grow unless it keeps growing outside of the borders of its main markets.
01:57 That, whilst we are starting to see that in terms of the international business growing, it is difficult to grow it to the same extent as their core business.
02:06 And then you add to that everything that's happening in China at the moment.
02:09 There's question marks around about the real estate market. There's questions around about credit.
02:13 We've got a deflationary environment. We're seeing asset managers elsewhere in the world pulling money out of Chinese stocks and Chinese equity markets.
02:22 Really having a tough time at the moment. So, you know, I think this is a difficult time.
02:27 But certainly there's going to be plenty of people that see this as a potential buying opportunity,
02:31 because from a valuation perspective at 10 price to earnings ratio, you know, we were looking at 40, 50 price to earnings ratio in the past.
02:41 But people really questioning whether this is the growth stock that they're looking for because they're just not growing that fast at the moment.
02:48 That doesn't necessarily mean we'll be in the same position in one, two years down the line.
02:53 It has been a big year, though, hasn't it, for Alibaba with a huge restructuring taking place, a new chief executive.
02:59 Do you think that will signal a change in its fortunes?
03:05 Potentially, look, they're trying to separate out the different segments of the business and sort of run run them from for their own merits.
03:12 Some people think that that's essentially going to lead to them spinning off some elements of the business.
03:17 And there's question marks about whether they've sort of taken their eye off the ball in terms of the core business.
03:23 That's where the main part of of their revenues comes from.
03:26 So they really need to make sure they're strengthening that side of the company.
03:31 So, you know, I do think that part of this is also a wider picture.
03:35 If you look across the spectrum of their competitors, they've also suffered over the course of the past year or so.
03:42 So this isn't necessarily just about Alibaba. But yes, I think they are certainly trying to take steps.
03:50 And in part, that is a case of saying, look, we've got a whole heap of money here and we can continue to ramp up the share buyback scheme because we perceive the company at the moment to be very cheap by historical standards.
04:02 Joshua, good to talk to you today. Thank you for joining us. That's Joshua Mahoney from Scope Markets.