Alibaba Group Holding Ltd., in its first earnings report as a publicly traded company, delivered on the growth prospects that have fueled a 54 percent stock surge since its September initial public offering.
The Chinese e-commerce company yesterday posted fiscal second-quarter profit that beat analysts’ estimates as increased shopping traffic and mobile spending in its home market generated more advertising. Revenue jumped 54 percent, more than anticipated.
Alibaba, with 307 million active buyers as of September, is luring more sellers to its e-commerce sites by providing advertising tools that analyze user preferences. Chairman Jack Ma last month said Alibaba may cooperate with Apple Inc. for mobile payment services as he seeks partners in Hollywood to add television and movie content. About 29 percent of revenue across China retail marketplaces comes from mobile, Alibaba said.
“Mobile contribution to total transactions were higher than expected, which was a surprise,” said You Na, an analyst at ICBC International Research Ltd. in Hong Kong. “Revenue was also better than what people were expecting.”
Alibaba, which raised a record $25 billion in its Sept. 18 initial public offering, sold the stock at $68 apiece. The American depositary receipts rose 4.2 percent to $106.07 at the close in New York yesterday.
Adjusted earnings per share for the September quarter were 2.79 yuan (46 U.S. cents), Hangzhou, China-based Alibaba said, topping the 2.74 yuan average of analysts’ estimates compiled by Bloomberg.
While revenue surged, profitability was hurt by costs to integrate newly acquired businesses, investments in mobile systems and marketing. The margin for adjusted earnings before interest, taxes, depreciation and amortization narrowed to 50.5 percent from 59.4 percent a year earlier.
The company, owner of Taobao Marketplace and Tmall.com, is ramping up preparations for a Nov. 11 sales event, its busiest shopping day of the year. It’s competing with Tencent Holdings Ltd. for the 527 million Chinese who access the Internet from mobile devices.
Net income fell 39 percent to 3.03 billion yuan in the three months ended in September, dragged down by a “significant” increase in share-based compensation expense and amortization of intangible assets, Alibaba said. Revenue advanced to 16.8 billion yuan, compared with the 16 billion-yuan average of 26 estimates.
“With heavy expectations going into this quarter, the overall performance was better than the Street was expecting,” said Ken Sena, an analyst at Evercore Partners Inc. in New York, who recommends buying Alibaba stock.
China has 632 million Internet users, more than the population of any other country except India.
Ma visited Hollywood in October to learn about movie studios, saying China’s film industry needed great cultural products. Alibaba offers entertainment content including high-definition movies and TV shows through its set-top boxes and online video site Youku Tudou Inc., in which Alibaba has a minority stake.
China will be the world’s largest movie market as the nation’s middle class expands to 200 million people, Ma said.
Ma is expanding into new businesses and targeting markets outside his home country.
AliExpress, the company’s market for customers outside China, was founded in April 2010 and is already the top shopping site in Russia and Brazil, markets where it currently has no employees. The company is looking for deals that can help it expand in Africa, Southeast Asia, Europe and the U.S.
Zhejiang Ant Small & Micro Financial Services Group Co., the payment-processing affiliate that includes Alipay, is expanding in the U.S. and Russia.
Alipay has 17.9 million active users overseas in more than 100 countries and is accepted by 2,000 merchants, Sabrina Peng, vice president for Alibaba’s finance arm’s international business, said in October.
In September, the finance business won approval to jointly set up a bank in China as it expands financial services operations.