Benzinga - by Shanthi Rexaline, Benzinga Editor.
Alibaba Group Holding Limited (NYSE:BABA) shares have been on a broad consolidation move since bottoming in late October 2022. The company is still reeling from the impacts of regulatory clampdowns and lackluster domestic economic growth. As the Jack Ma-founded company prepares to release its fourth-quarter results Tuesday before the markets open, here’s a look at how the company is positioned for the near- and medium-term.
Protracted Downturn: From a peak market cap of $858.50 billion in late October 2022, Alibaba’s valuation has plummeted. As of Friday’s close, its market cap was at $194.79 billion. The decline began when the Chinese government initiated a crackdown on mega-cap tech companies, citing concerns that their significant growth granted them monopolistic power.
Source: Y Charts
It all started with Ma taking on the Chinese Communist regime by criticizing banking regulations, a day after Alibaba’s sister concern Anti Financial priced its initial public offering. Repercussions soon followed. The company was slapped with a hefty $2.8 billion in fine on the grounds of engaging in monopolistic practices and the Ant IPO was soon shelved. Ma entered a self-imposed exile, leaving his trusted lieutenant Daniel Zhang to manage affairs in his absence.
What started as an onslaught on Alibaba spread to other big techs as well.
To make matters worse, despite the re-opening after the COVI-19 pandemic, the Chinese economy continued to reel under subpar economic growth and a deflationary environment.
Alibaba also faced competition from a breed of smaller social commerce companies, which integrate social interactions and e-commerce, offering personalized content recommendations, user-generated content and influencer endorsements.
Resuscitation Efforts: Alibaba’s turnaround efforts included a decision in March 2023 to splinter the company into six businesses: its core Alibaba domestic e-commerce business, Cainiao logistics business, Aliyun cloud computing business, international e-commerce, a digital-services business and a small media group.
In June, however, the company’s leadership baton was passed on to Eddie Wu, one of the co-founders. Zhang was relegated to the role of heading the company’s cloud business. Subsequently, in September, Zhang stepped down from all his roles in Alibaba. Under the new leadership, this splintering strategy was reversed. The plan to IPO the cloud business was abandoned in November, and earlier this year, the company also scrapped the Cainiao IPO plan, opting instead to acquire the remaining 36% stake it did not already own.
Q4 Expectations: Analysts, on average, expect the company to earn $1.41 per share on revenue of $30.42 billion. This compares to the year-ago’s $1.50 per share and $29.15 billion.
Alibaba’s Taobao online shopping and Tmall B2C online retail platforms may have seen a strong sequential increase in gross merchandise value, reported Bloomberg.
China reported a year-over-year growth rate of 5.3% for the March quarter, surpassing the consensus estimate, although consumer spending did not show significant improvement.
Alibaba recently intensified its focus on generative AI, a cutting-edge technology that has seen widespread adoption. Last week, the company released Qwen2.5, the latest iteration of its family of large-language models called Tongyi Qianwen.
“The Qwen family has been deployed by over 90,000 enterprise users via Model Studio since the AI development platform launched in June last year,” Ali Cloud said in a statement.
Alibaba’s NYSE-listed ADRs ended Friday’s session up 0.73% at $80.02, according to Benzinga Pro data.
Read Next: Alibaba’s New AI Model Claims to Beat OpenAI’s GPT-4 in Language Skills
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