[Further media: Crazy acquisition of Ali may announce the first profit decline in quarterly earnings for the quarterly earnings report] According to foreign media reports, with the Alibaba Group's net profit and revenue growth rate gradually slowed down, crazy acquisition may be Will affect its profits. In order to vent their dissatisfaction, investors have reduced the market value of Alibaba Group by 61 billion U.S. dollars.
Alibaba Group may release its first quarterly earnings decline in quarterly earnings for the first time in a year, which mainly reflects the consolidation of loss-making business and the company's efforts to increase its spending to withstand the competition from Tencent Holdings to its traditional territory - retail and payment. Enter the army. Although Alibaba Group’s revenue for the previous fiscal season is expected to grow by 53% to RMB 59 billion (US$12.4 billion), it will also be the quarter with the least increase in the past seven quarters.
As China's largest online store, Alibaba Group is trying to get rid of the slowdown in core business growth through acquisitions. Entering logistics, cloud computing, online video, and physical retailing businesses have caused the company to pay a price, resulting in a loss of profitability and further away from the “light asset†concept once cherished.
The market’s growing concerns about Alibaba Group’s increasing expenditures and the concentration of technology stocks in the global market have caused the current share price of the company to have slipped by more than 10% from its historical high in January this year. UBS analyst Jerry Liu said that the decline in Alibaba Group’s profit margin will continue into the next fiscal year. "We expect Alibaba Group's profit margin will continue to decline in 2019, and then it will stabilize and improve in a longer period of time," the analyst said in a research report. “Many initiatives of the Alibaba Group are still just starting, and the company recently injected huge amounts of money into the video and payment sectors.â€
Ma Yun is mimicking to some extent the practice of Amazon, the global e-commerce pioneer Jeff Bezos. For years, Amazon has been in a state of sustained losses, but it has reassured tight shareholders by keeping its revenue growing at a high rate. Ma Yun’s idea is to build Alibaba Group into an online empire that spans online retail, cloud computing and big data.
He Zhian, the founder of JanchorPartners, stated that in less than a decade, Alibaba Group will become a company with a market value of trillions of dollars. The investment company invested in Alibaba Group in 2012 and has been holding the company's stock, and it has been profitable several times.
However, the situation is not so optimistic in the short term. With the continued deterioration of trade relations between China and the United States, as well as Facebook's user leakage scandal, the market is worried that the supervision of technology companies will be further strengthened. Risk-averse investors have begun to sell technology stocks globally.
When Alibaba Group announced its results on Friday, investors will pay close attention to the company’s full-year revenue expectations. Jerry Liu estimates that Alibaba Group’s revenue growth from FY 2019 will be between 40% and 46%, which is lower than Alibaba Group’s own forecast of 48%.
Ma Yun’s aides have no choice but to continue spending money. This is not just because the major markets of Alibaba Group have begun to saturate, but also because they need to fend off Tencent in the e-commerce, cloud computing, payment, entertainment and physical retail industries.
Alibaba Group's decision to fully control several loss-making subsidiaries is also one of the reasons for the company's continued decline in profit margins. The company said in April this year that it will be completely hungry with a valuation of 9.5 billion U.S. dollars. Although the performance of hungry will not be incorporated into Alibaba Group's financial results until the end of June's fiscal quarter, the company's performance has been affected by the Caiyuan logistics business and Youku video business. Alibaba Group also controls Lazada, the e-commerce platform in Southeast Asia, to promote the expansion of the company's business overseas. In addition, the company also formalized its relationship with the affiliate Ant Financial Services and obtained a 33% stake in the latter.
Finally, Alibaba Group also increased its investment in data center business and maintained its leading position in China's cloud computing field. JP Morgan expects that the size of China's cloud computing market will reach RMB 152 billion by 2021; Alibaba Group is expected to occupy 60% of the market's share, which is double that of last year's share. John Choi, an analyst at Daiwa Capital Markets Hong Kong Limited, predicts that Alibaba Group’s cloud business revenue for the previous quarter may double.
As far as the current situation is concerned, investors may continue to hold Alibaba Group’s shares cautiously. "The recent pressure on Alibaba Group's share price reflects investors' concerns about the company's organic growth momentum and continued decline in profit margins," said Huaxing Capital analyst Ella Ji in a research report.
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