Why Alibaba Stock Jumped Today
What happened
Shares of Alibaba (NYSE: BABA) were moving higher today after the Chinese tech giant posted better-than-expected results in its first-quarter earnings report, showing signs that its long malaise through a government crackdown and a sluggish Chinese economy may be coming to an end.
As of 12:57 p.m. ET, the stock was up 5.7% on the news.
So what
Revenue growth in the quarter accelerated, increasing 14% to $32.3 billion, ahead of estimates at $31.2 billion, which was its fastest growth rate in several quarters.
The company has reorganized its business structure and management said the move, which regrouped the business into six subgroups, is paying off. Its Taobao and Tmall e-commerce-focused group saw revenue increase 12% to $15.9 billion, and growth in international e-commerce, local services, logistics, and digital media was robust as well, with each segment up 30% or more.
Profitability improved as the company narrowed losses at its smaller business groups, and adjusted earnings before interest, taxes, and amortization (EBITA) at Cainiao Smart Logistics improved from a loss a year ago to $12.1 million. The vast majority of Alibaba's profits still come from Taobao and Tmall, and the company said that adjusted operating profit in the quarter rose 43% to $952 million. Adjusted earnings per American Depositary Share (ADS) were up 48% to $2.40, ahead of the consensus at $2.02.
CEO Daniel Zhang said: "Alibaba delivered a solid quarter as we continue to execute our reorganization, which is beginning to unleash new energy across our businesses. Through this self-driven transformation, we aim to catalyze innovation, promote vitality in our organization, and enable businesses to focus on long-term growth."
Now what
Alibaba doesn't give guidance in its quarterly reports, but the acceleration in growth should be encouraging. Much of the company's recent struggles were due to outside forces, including Beijing's tech crackdown, China's Zero-COVID policy, and sluggish economic growth.
As those fade, Alibaba should be able to deliver solid growth. While the stock still remains risky, shares are cheap and should keep rising if this momentum continues.
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Jeremy Bowman has positions in Alibaba Group. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
