Analysts Break Down Alibaba's Q4 Earnings

China-based e-commerce giant Alibaba Group Holding Ltd BABA Wednesday reported fiscal fourth-quarter results that came in better than expected, but management's guidance for fiscal 2020 missed estimates. Here is a summary of how some of the Street's top analysts reacted to the report.

The Analyst

KeyBanc Capital Markets' Hans Chung maintains an Overweight rating on Alibaba with an unchanged $240 price target.

Mizuho Securities' James Lee maintains at Buy, price target lifted from $215 to $225.

Raymond James' Aaron Kessler maintains at Strong Buy, price target lowered from $285 to $280.

KeyBanc: Q4 Beat, Conservative Guide

Alibaba reported a 51 percent year-over-year increase in revenue to ¥93.5B ($13.93 billion), which Chung said exceeded expectations of a 47 percent growth rate. The growth was driven by an acceleration in customer management revenue (CMR) and commission along with a stronger retail performance. Adjusted EBITDA came in ¥1.4 billion better than expected, mostly driven by better performance in the Core Commerce business and narrower low in Digital Media and Entertainment.

Management's new fiscal 2020 revenue guidance of ¥500 billion fell short of expectations of ¥510 billion and implies a 33 percent year-over-year growth rate, according to the analyst. The outlook implies a low-20s growth rate, which looks "overly conservative" when considering recent momentum while new initiatives in the non-core business will contribute to growth.

Raymond James: What To Like, Not Like

Alibaba delivered a "strong" quarter highlighted by three positive takeaways, Kessler wrote in a note. These include:

  1. Revenue upside was driven by Tmall gross merchandise volume (GMV) growth, a higher number of paying merchants, and better recommendation feed testing;
  2. New Retail revenue outperformed from strong same-store sales, expanding footprint, and in-store optimizations; and
  3. EBITA beat by 10 percent.

Kessler said one item stands out as a negative: Management's decision not to expand monetization initiatives contrasts prior expectations for an uptick in monetization activity in the back half of calendar 2019.

Mizuho: Newsfeed Strategy The Right Approach

Alibaba's ad revenue rose 31 percent from last year, which came in better than the 28 percent growth the Street expected. Lee said the company realized a 300 basis point acceleration in revenue growth as management increased the testing for newsfeed monetization and improved sentiment among new advertisers.

The company said newsfeed traffic for monetization won't expand in fiscal 2020 as management remains focused on growing the user base in lower-tier markets over the near term. This is the appropriate strategy to generate a sustainable long-term growth profile and a gradual commercialization process, the analyst wrote in the note.

Price Action

Alibaba's stock traded around $176.45 at time of publication.

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Photo credit: Rico Shen, via Wikimedia Commons

Posted In: Aaron KesslerChinaChina eCommerceecommerceHans ChungJames LeeKeyBanc Capital MarketsMizuho SecuritiesRaymond JamesAnalyst ColorEarningsNewsGuidancePrice TargetTop StoriesAnalyst Ratings