Despite China’s e-commerce giant Alibaba’s stock price falling sharply, its latest financial performance reflects confidence.
Last week, Alibaba released its 2015 annual report along with an open letter from Executive Chairman, Jack Ma and CEO Yong Zhang to shareholders. The online annual report contains videos and charts made up of four parts: ‘Alibaba Defined’, ‘The New China’, ‘The Alibaba Experience’ and, ‘Founded in China Created for the World’.
The thrust of the report is an attempt by Alibaba to try to reassure investors of Alibaba’s growth prospects by explaining the Chinese market and Alibaba’s strategy for the long term.
After being responsible for the world’s largest IPO last year in September, Alibaba’s stock price reached USD 119.45 in two months, but then fell all the way down to its initial price of USD 68. Investors are concerned China’s economic slowdown will negatively impact Alibaba’s growth. Last month, Barron’s published a brutal article about Alibaba, stating it believes the company is overvalued and predicting Alibaba’s stock will fall down by another 50% to USD 35.
Alibaba’s annual report, however, has presented some stunning performance numbers responding to doubts from Barron’s and other investors. Total annual GMV reached USD $394 billion, with 40.6% coming from mobile. Annual active buyers hit 350 million and total revenue was USD $12.3 billion with 45.0% YoY growth.
Alibaba is vigorously claiming that the company is much “bigger” than Ebay or Amazon. The company is building an ecosystem that includes five key platforms: e-commerce, logistics, cloud computing, digital marketing and mobile Internet services. Alibaba is hoping the ecosystem will become the catalyst for a transformation of the business landscape and provide the basic infrastructure for the future of commerce. “Alibaba Group’s strategy is to build the infrastructure of commerce for the future,” Jack Ma said.
The five platforms are already taking off. Cainiao Logistics, an Alibaba investment, handles around 10 billion packages every year. After six years investing in cloud-computing, Alibaba has a user base of over one million enterprises and maintains annual growth of over 100%. Alibaba has also made a series of important investments in UCWeb and AutoNavi to enrich its mobile-based products and services.
But, let’s not applaud Alibaba so soon. Although bright and promising, some of the performance numbers and Alibaba’s blueprints, indicate YoY growth of Quarterly GMV (China commerce retail) to have been in decline since 2014 hitting a low of 34% at June 2015. Investors have reason to believe that the downturn of the Chinese economy is dragging down domestic consumption in China and hurting Alibaba’s growth.
Earlier this month, the IMF forecasted China’s economic slowdown to continue and GDP growth next year will go down to 6.3%, even lower than this year’s 6.8%.
“I do not agree with the notion that consumption will decline as economic growth slows.” Jack Ma, on the other hand, firmly believes that Tmall and Taobao can continue to prosper since consumers will be more likely to shop online for value-for-money merchandise.
Jack Ma is also optimistic that China’s economic rebalancing will eventually boost the use of big data and Internet technology. In the next decade, Alibaba will focus on globalization, development of the rural economy and big data to fully embrace opportunities. By leveraging mobile Internet technology, big data, logistics and Internet financing, Alibaba aims to enable small-to-medium-sized businesses around the world to connect with each other and to renovate China’s rural infrastructure.
Alibaba’s stock price climbed 1.49% to USD 68.71 after the release of its annual report.