Alibaba Group Holding Ltd. fell to a record low closing price, after sales climbed at the slowest pace in at least three years and transaction volumes missed analyst estimates amid a weakening Chinese economy.
Alibaba fell 5.1 percent to $73.38 at the close in New York. The shares are still trading above the $68 paid in September’s initial public offering, which raised a record $25 billion.
Revenue rose 28 percent to 20.2 billion yuan ($3.2 billion) in the three months that ended in June, down from an average of 56 percent in the previous 12 quarters. The company also announced plans to buy back $4 billion of stock.
The slowing growth stems from e-commerce market saturation in China’s larger, wealthier cities and the company’s strategy of shifting to services over smartphones and tablets, which generate less revenue from ads compared with desktop computers. Investor confidence has been shaken, with the company’s market value plunging $100 billion, amid a domestic economy growing at the weakest pace since 1990 and lawsuits over counterfeits.
“Online shopping in larger cities in China has already reached saturation,” Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP, said by phone before the earnings. “Alibaba needs to invest in new areas to search for other avenues of growth.”
The e-commerce operator will purchase its shares over a two-year period, mainly to offset dilutions such as from its compensation programs, in its first buyback since listing.
Gross merchandise volume, which measures transactions on its Chinese retail marketplaces, rose 34 percent to 673 billion yuan in the quarter, short of the 38 percent growth expected by analysts.
That hasn’t dulled billionaire Chairman Jack Ma’s appetite for expansion. On Monday, he announced a $4.6 billion investment in Suning Commerce Group Co. to get more access to the electronics retailer’s network amid intensifying competition from online shopping site JD.com Inc.
Ma is trying to diversify Alibaba’s businesses while simultaneously tapping more of the 594 million Chinese who access the Internet from their smartphones and tablets.
The strategy includes expansion into entertainment, health care, location-based services pushing its own YunOS smartphone operating system.
Alibaba’s overseas strategy has seen it start e-commerce sales in Russia, Brazil and India through its AliExpress service. Founded in 2010, AliExpress is the top shopping site in Russia and Brazil.
Alibaba named former Goldman Sachs Group Inc. partner Michael Evans as president this month to help its global push.
As China introduces policies that make it cheaper to import overseas goods, Alibaba is competing with JD.com to introduce more brands from the U.S. and Europe. Thousands of American products, including Converse Inc. sneakers and Procter & Gamble Co. toothpaste, are available to Chinese shoppers through Alibaba’s websites.
As it deals with the slowing Chinese economy, Alibaba has also been 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.