Alibaba’s Earnings and its Recent Scandals with the Government
Alibaba Group Holding Ltd (NYSE: BABA)’s quarterly revenue fell short of analysts’ expectations, showing signs of a slowdown in the Chinese e-commerce company’s growth during the hard-fought holiday shopping season.
There is also a recent speculation where Chinese regulators’ concern over its Taobao Marketplace’s (a C2C marketplace) credibility issues. Apparently the State Administration for Industry and Commerce in China conducted a recent sample survey to find out the percentage of counterfeit items from various online vendors. Taobao is one of the vendors.
The survey from Alibaba’s flagship Taobao includes 51 items, and only 37.25% of them are authentic according to SAIC’s (State Administration for Industry and Commerce) report.
During the conference, here are some points that I would live to summarize:
- BABA says that it will meet with te regulators in July. It stresses that BABA meets with regulators rather frequently, so nothing out of the ordinary.
- BABA says the company never requested any publication, of any report, to be delayed until after its IPO.
- BABA thinks it felt compelled to speak out against these allegations, which quotes it has invested over RMB 1.0 billion over the past year to fight against counterfeiting and is adding 300 more people to combat it. Also, the company is considering a formal complaint.
- BABA says its mobile market continues to grow. It says the improvement may not always be linear.
- The Co also addresses that the rapid growth may encounter some short term pain in volume growth, but the long-term value offsets that.
Goldman Sachs (GS) lowered its price estimate for BABA to $98 per share.
AlexRT Standpoint:
I think this dip in BABA’s price is only temporary. I stand with MorningStar that BABA’s network externality and advantages still makes it a company which keeps competitors at bay for an extended period.
I think $89 for BABA is undervalued. If you are looking for a long term investment, I think this dip creates a buy-in opportunity. However, I strongly suggest that wait for the volume and a clear signal for reversal before making any solid investment.
