Alibaba Beats Quarterly Sales Estimates As Commerce, Cloud Businesses Grow

Alibaba topped quarterly sales estimates driven by “robust” revenue growth in the Chinese e-commerce giant’s commerce retail and cloud computing businesses .

Alibaba (BABA) generated 153.75 billion yuan ($21.76 billion) in revenue in the quarter ended June 30, an increase of 34% year-over-year, surpassing analysts’ estimates of 147.77 billion yuan. During the reported quarter, the company earned, excluding items, 14.82 yuan per American depository share (ADS) versus the Street consensus of 13.78 yuan. 

“Alibaba delivered excellent results this past quarter. We were well positioned to capture growth from the ongoing digital transformation, which has been accelerated by the pandemic, in both consumption and enterprise operations,” said Alibaba CEO Daniel Zhang. “We mobilized our entire digital infrastructure to support the economic recovery of businesses across a wide range of sectors, while broadening and diversifying our consumer base by addressing their changing preferences in a post-COVID-19 environment.”

In the June 2020 quarter, cloud computing revenue grew 59% year-over-year to 12.34 billion yuan ($1.74 billion), fueled mainly by increased revenue from both Alibaba’s public cloud and hybrid cloud businesses, reflecting higher average revenue per customer. Alibaba Cloud was the largest public cloud service provider in China, as measured by market share for IaaS (Infrastructure as a Service) as well as PaaS (Platform as a Service) for the quarter ended March 31, the company said.

“Our domestic core commerce business has fully recovered to pre-COVID-19 levels across the board, while cloud computing revenue grew 59% year-over-year,” Chief Financial Officer Maggie Wu said in a statement.

Earlier this month, Oppenheimer analyst Jason Helfstein raised the stock’s price target to $290 from $260 and reiterated a Buy rating, saying that e-commerce penetration data (online physical goods GMV as a percentage of total retail) reached 29% in June, on COVID-19 tailwinds, up 6% y/y. (See Alibaba stock analysis on TipRanks).

“We believe the penetration increase is sustainable, as new buyers appreciate convenience and existing buyers expand purchasing categories,” Helfstein wrote in a note to investors. “While it is difficult to discount the impact of worsening US/China relations, we believe BABA remains well positioned.”

Turning to other Wall Street analysts, the bulls have it. The Strong Buy consensus boasts 20 Buy ratings versus 1 Hold rating. With shares up 21% so far this year, the $278.05 average price target implies a more modest 8.6% upside potential in the shares in the coming 12 months.

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