Alibaba Group Holding Ltd. shares surged after China’s biggest e-commerce company named a new chief executive officer and posted a 45 percent increase in revenue.
Daniel Zhang will become CEO on May 10, replacing Jonathan Lu, who will remain on the board as vice chairman, the company said Thursday. The change was announced as Alibaba’s sales rose to 17.4 billion yuan ($2.8 billion) in the three months through March, beating analysts’ estimates.
Alibaba’s results helped ease fears that revenue growth was slowing as China’s economy cools. The stock had also been falling out of favor with investors after Chairman Jack Ma said last month that there would be a hiring freeze and the Chinese government criticized the company’s business practices.
“Alibaba’s strong financial results reaffirm that it is a must-own stock,” said Brad Gastwirth, chief executive officer of San Francisco-based ABR Investment Strategy.
Shares of Alibaba climbed 7.5 percent to close at $86 in New York, the biggest gain since September. That cut the stock’s drop this year to 17 percent. Shares in the September initial public offering were sold at $68 apiece, raising a record $25 billion.
Yahoo! Inc., which in January said it would spin off its stake in Alibaba, jumped 5.3 percent to $43.87. The spinoff is expected to be completed by year’s end.
Ma elevated Zhang after the chief operating officer helped turn the Nov. 11 “Singles’ Day” shopping promotion into the company’s biggest sales event.
“Daniel is a proven international business leader and innovator with a strong track record of delivering results,” Ma said. “Today’s announcement reflects our commitment to continuing to develop strong leadership from within.”
Net income fell 49 percent to 2.9 billion yuan, the company said. Adjusted net income, which excludes some items, rose 16 percent to 7.74 billion yuan.
Zhang, 43, joined Alibaba as chief financial officer of Taobao Marketplace in August 2007 and has been COO since September 2013. The change is being made because Alibaba wants to promote young talent, Executive Vice Chairman Joseph Tsai said on a conference call.
Lu, 45, joined Alibaba in 2000 and replaced Ma as CEO two years ago.
“Expectations going into the fourth-quarter earnings were quite low,” said Brendan Ahern, chief investment officer at Krane Fund Advisors LLC in New York. “The change of CEO shows that senior management is very attuned to the fact that the stock has lagged.”
Alibaba is trying to diversify its businesses while simultaneously tapping more of the 557 million Chinese who access the Internet from their smartphones and tablets. Alibaba announced at least $2.4 billion in investments the past 12 months, including a Chinese soccer team, smartphone maker and mobile application for hailing taxis.
The company’s overseas strategy has seen it start e-commerce sales in Russia, Brazil and India through its AliExpress service as it also targets more customers outside China’s biggest cities.
“Alibaba is positioned to leverage the next legs of growth in online shopping in China, from lower tier cities and via mobile devices,” HSBC Holdings Plc analysts led by Chi Tsang wrote in a report to clients Friday. “It remains our top pick,” they wrote, affirming a buy rating and share price forecast of $136.
Ma has set a goal of getting 50 percent of sales from outside China as it expands beyond the country’s urban areas. That effort comes as the nation’s economy is projected to grow at its slowest pace since 1990.
“We will go further to build a global network,” Zhang said in an interview Thursday with Bloomberg Television.
Online commerce from China accounted for 80 percent of total revenue in the March quarter, while international e-commerce sales were just 9 percent of the company’s total, Alibaba said.
For more, read this QuickTake: China's E-Commerce Giant
As it deals with the slowing Chinese economy, Alibaba also is battling criticism from the government. In January, a report by the State Administration for Industry & Commerce accused Alibaba of allowing merchants to operate without required business licenses, to run unauthorized stores that co-opt famous brands and to sell fake wine and handbags.
“Perhaps Jack is sending a signal to the capital markets and the regulator that he’s willing to make changes,” said Mike Clendenin, managing director of RedTech Advisors.