Wallstreetcn
2024.05.19 11:35
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Alibaba regains initiative

It's tough to hold the fort

Author | Liu Baodan

Editor | Zhou Zhiyu

The e-commerce market is still undergoing a major reshuffle. Under the pressure from competitors such as Pinduoduo, Douyin, and JD.com, Alibaba has made significant investments to maintain its market position. Now, Alibaba can finally breathe a sigh of relief.

On May 14th, Alibaba Group released its Q4 and full-year financial results for the 2024 fiscal year. In this quarter, Alibaba achieved a revenue of 2218.74 billion RMB, a year-on-year growth of 7%, with a growth rate 5 percentage points higher than the same period last year. Among them, Taobao's revenue reached 932.16 billion RMB, a 4% year-on-year growth, reversing the decline from the same period last year and returning to growth.

A more positive signal is the sales growth. This quarter, Taobao and Tmall achieved double-digit growth in GMV. Compared to the previous year, GMV growth for Taobao and Tmall showed a decline. After a year of development, the sales of Taobao and Tmall have returned to double-digit growth, indicating that Taobao is regaining market initiative.

In addition, Alibaba's international market strategy is beginning to show results, with Alibaba International and Cainiao achieving revenue growth of 45% and 30% respectively this quarter. Core Alibaba Cloud revenue grew by 3%, with AI-related revenue recording triple-digit year-on-year growth.

As for Alibaba's local life services, revenue growth in this quarter was 19%. Following Yu Yongfu's resignation as chairman, the future trend of this business will be a focus of attention. The only business among Alibaba's six major businesses that saw a decline was the digital entertainment sector, with a slight decrease in revenue of 1%.

Over the past year, Alibaba has undergone comprehensive adjustments in its structure and personnel. With Eddie Wu taking the helm, Alibaba's future strategy is becoming clearer, focusing on Taobao and Alibaba Cloud. There is a particular emphasis on increasing investment in improving user experience to support Taobao Group's growth and solidify its market leadership position.

Alibaba is determined to maintain its market share and growth rate in the e-commerce market. To achieve this, Alibaba has increased its focus on Taobao in terms of personnel and resources, even at the expense of sacrificing a certain amount of profit growth.

In fact, when Eddie Wu took over Taobao at the end of December last year, he assembled a new young team and transferred key personnel such as Wu Jia, President of Alibaba's Intelligent Information Business Group, and Chu Duan, founder of Xianyu, to important positions in Taobao.

In order to regain users' love for Taobao, the platform has recently implemented a series of measures, including canceling pre-sales during the 618 shopping festival, offering unconditional refunds, and providing free returns for 88VIP members. To attract user attention, Taobao announced the addition of billions in cash rewards and billions in traffic to enhance content e-commerce.

This effort is also reflected in the profit performance. According to the financial report, Taobao's adjusted EBITA for this quarter was 38.501 billion RMB, a 1% year-on-year decrease. This is mainly due to Taobao's increased investment in user experience and technological infrastructure.

Although market competition has eroded profit growth, for Alibaba, winning over users and the market is a top priority, which is the desired outcome for Alibaba's management.

During the earnings conference call that evening, Eddie Wu stated that Taobao Group's "customer-first" strategy is effective. Investments in price competitiveness and user experience have received positive feedback from consumers, leading to strong growth in the number of quarterly buyers and purchase frequency, driving GMV to achieve strong double-digit growth Next, Alibaba will continue to implement its strategic focus. Alibaba's management stated, "Improving product competitiveness, efficiency, customer service, and consumer experience to drive GMV growth and increase user consumption frequency are our top priorities this year."

After experiencing a significant decline in market share and briefly being surpassed by Pinduoduo in market capitalization, Alibaba is trying to emerge from its low point and regain confidence in future performance. During the conference call, Alibaba's management unusually provided very clear performance guidance.

Alibaba expects that the enhancement of e-commerce user experience will drive strong domestic GMV growth in the fiscal year 2025, while overseas e-commerce will maintain rapid growth momentum. With the drive from AI and overseas e-commerce, the group's revenue is expected to return to double-digit growth in the second half of the fiscal year 2025.

The capital markets are also reassessing Alibaba's value. Following the performance announcement, the stock price saw a significant increase. On May 17th, Alibaba's US-listed shares rose by 7.05%, reaching a new six-month high at the close. Several financial institutions have also expressed confidence in Alibaba, with Goldman Sachs and Bank of America Securities both raising Alibaba's target price. Goldman Sachs emphasized Alibaba's stable performance and recovery growth in the fiscal year 2024.

Several well-known investment institutions have started to support Alibaba. Hedge fund legend David Tepper, Duan Yongping, a well-known hedge fund manager, and Michael Burry, the prototype of the protagonist in the movie "The Big Short," all increased their holdings of Alibaba in the first quarter. Appaloosa, managed by David Tepper, disclosed in its 13F filing that it significantly increased its stake in Alibaba this quarter, raising its Alibaba holdings to 11.25 million shares.

However, while Alibaba's series of countermeasures have shown initial effectiveness, the e-commerce market is in a continuous dynamic development process, and the challenges Alibaba faces are still significant.

On one hand, there is a downturn in social consumption, and consumer shopping behavior is becoming more rational. On the other hand, competitors including JD.com, Douyin, Pinduoduo, Kuaishou, among others, are continuously making efforts. For example, Douyin's e-commerce has initiated a low-price strategy, vigorously promoting low-priced products in its mall and short videos; JD.com has also identified "content ecology" as its strategic direction for 2024.

E-commerce has entered a fiercely competitive environment, and every growth of Alibaba means taking market share from competitors. This long and brutal business game will continue to evolve in practice, and Alibaba still has many battles to fight