On an otherwise gloomy market day, shares of Alibaba Group (BABA +2.66%) rose as much as 5.3% in Thursday's market action. The China-based provider of e-commerce services and support tools reported solid first-quarter results before the opening bell, and investors embraced the report with open arms.
Alibaba's Q1 by the numbers
|
Metric |
Q1 2018 |
Q1 2017 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$7.40 billion |
$4.84 billion |
53% |
|
Free Cash Flow |
$3.27 billion |
$1.92 billion |
70% |
|
GAAP Net Income |
$2.07 billion |
$1.08 billion |
92% |
|
Adjusted Earnings Per Share and ADS (Diluted) |
$1.17 |
$0.74 |
58% |
Data source: Alibaba.
These results exceeded Wall Street's consensus estimates on the top and bottom lines. Alibaba's management reiterated their full-year guidance for revenue growth of approximately 47%.
Retail operations in the Chinese market increased 57% year over year to $5.4 billion. This is the company's bread and butter, providing a stable financial platform from which to launch various high-growth initiatives.
Meanwhile, the smaller cloud computing segment doubled its first-quarter sales to $400 million. International retail sales jumped 136% higher, landing near $440 million. These high-octane operations promise to make up a larger portion of Alibaba's total results, but they are still too small to move the company's financial needle in a meaningful way.
These figures include a 2% headwind from currency exchange effects, as the U.S. dollar has posted a slight increase in value against the Chinese Renminbi.
Image source: Alibaba.
What's next?
Alibaba is putting its back into international growth. The company held a retail conference in Detroit during the first quarter to show American sellers and producers how Alibaba's platforms can help them market their goods in China. A similar event is headed to Canada in September. And of course, the relationship goes both ways. Many independent merchants on all-American retail platforms such as eBay (EBAY +2.54%) and the Amazon.com (AMZN +4.00%) Marketplace already source their goods from Alibaba-powered producers. Other non-Chinese efforts include new partnerships in Russia and a $1 billion investment in a Singapore-based e-commerce group.
As an Alibaba shareholder, I'm excited to see the company leaning into the international opportunity in a big way. It's a small world when you connect consumers and businesses around the globe, but also a big one when the addressable market expands outside the Middle Kingdom.
Altogether, Alibaba shares have now gained 88% in 2017. After setting fresh all-time highs on Thursday, the stock is trading at start-up-like valuation multiples. But it's hard to complain because Alibaba can back those ratios up with fantastic growth across the board. You know we're talking about a special business when I call a division with 53% annual sales growth out as Alibaba's "bread and butter."
I'm a happy camper, and I can't wait to see where this gravy train is going next.
