- China Retail constitutes 43% of the Trefis price estimate for Alibaba Group's stock.
- China Wholesale & Other constitutes 8% of the Trefis price estimate for Alibaba Group's stock.
- Cloud Computing constitutes 7% of the Trefis price estimate for Alibaba Group's stock.
WHAT HAS CHANGED?
- Latest Earnings
Over Q1 FY'23, Alibaba saw revenue remain roughly flat year-over-year at RMB 205.5 billion ($30.67 billion) because of Covid-19-related restrictions in China and weak macroeconomic conditions. Adjusted earnings per ADS declined by about 29% year-over-year to about RMB 11.73 ($1.75). While the e-commerce business was responsible for the slowdown, Alibaba's cloud business is also seeing growth cool, with sales growing by just 10% year-over-year, the segment's slowest growth rate on record.
Note: Alibaba's Q1 FY'23 ended on June 30, 2022.
- China's Regulatory clampdown
Chinese regulators have been cracking down on homegrown technology giants over the last two years, focusing on data, privacy, and anti-trust issues. There are concerns that Internet platforms could face more intense regulatory scrutiny. Alibaba has already faced a sizable antitrust fine. Its affiliate Ant Group had to cancel its initial public offering while being asked to spin off some of its credit and lending businesses.
- Delisting concerns in the United States
There have been concerns about the futures of Chinese stocks listed on U.S. exchanges, as the Public Company Accounting Oversight Board does not have full access to their audit reports. While Chinese companies are forbidden from sharing these reports currently, China has signaled that it might
be willing to approve greater audit transparency and disclosures.
Alibaba is a Chinese technology company focusing on e-commerce, logistics, cloud computing, digital media, and other subscription software. While the company reports its business in four segments, we have reworked its structure into five segments that better capture Alibaba's business based on its operations. The China Commerce segment revenues are derived from retail e-commerce and associated marketing services in China. Digital Media & Innovation Initiatives segment revenues are derived from content subscription, software subscription, and merchant advertising offerings. China Wholesale & Other revenues are derived from wholesale commerce and logistics services, primarily driven by Chinese consumption. International Commerce segment revenues are derived from retail and wholesale operations and advertising services outside China. Cloud Computing segment revenues are derived based on customers' duration and usage of Alibaba's service.