Alibaba Group Holding Limited failed to meet the Zacks Consensus Estimate for third-quarter fiscal 2024 non-GAAP earnings, reporting $2.67 per ADS (RMB 18.97), a 2.2% shortfall. This amounted to a 2% decrease from the previous year.
However, revenues of RMB 260.35 billion ($36.7 billion) reflected a 5% increase from the same quarter last year. Despite the impressive climb, this figure fell short of the Zacks Consensus Estimate of $37.2 billion.
The surge in revenues was fueled by robust performance in the international commerce retail business, alongside strong showings in local services and Cainiao logistics services. Notably, the Digital Media and Entertainment Group segment also delivered a solid performance.
Nevertheless, sluggish growth in the China commerce business posed a significant concern.
Over the past year, Alibaba’s shares plummeted by 30.8%, in stark contrast with the Retail-Wholesale sector’s 26.2% return.
Alibaba’s Revenue Streams
Taobao and Tmall Group (49.6% of the total revenues): This segment, which encompasses Taobao, Tmall, Xianyu, 1688.com, and other businesses in China’s retail and wholesale markets, generated RMB 129.1 billion ($18.2 billion) in revenues—a 2% increase from the previous year.
China commerce retail (47.5% of the total revenues): Revenues in this vertical amounted to RMB 123.8 billion ($17.4 billion). The figure reflected a 1% rise from the previous year, driven by growing online GMV on Taobao and Tmall, albeit overshadowed by a decreasing take rate.
China commerce wholesale (2% of the total revenues): The business yielded RMB 5.31 billion ($747 million), marking a 23% year-over-year increase, attributed to growing revenues from value-added services.
Alibaba International Digital Commerce Group (11% of the total revenues): In this segment, Alibaba harvested RMB 28.52 billion ($4.02 billion) in revenues. This indicated a robust 44% uptick from the previous year.
International commerce retail (8.9% of the total revenues): Revenues totaled RMB 23.3 billion ($3.3 billion), marking a hefty 56% increase from the previous year, attributed to solid combined order growth in AIDC’s retail businesses.
International commerce wholesale (2% of the total revenues): The business earned revenues of RMB 5.26 billion ($740 million), showcasing an 8% year-over-year growth.
Local Services Group (5.8% of the total revenues): This segment boasted revenues of RMB 15.2 billion ($2.14 billion), marking a robust 13% growth from the previous year.
Cainiao Smart Logistics Network (10.9% of the total revenues): Revenues totaled RMB 28.5 billion ($4.01 billion), increasing by 24% from the prior year.
Cloud Intelligence Group (10.8% of the total revenues): This segment contributed RMB 28.1 billion ($3.95 billion) to the company’s coffers, showing a 3% increase from the previous year.
Digital Media and Entertainment Group (1.9% of the total revenues): Revenue for this segment amounted to RMB 5.04 billion ($710 million), marking an 18% increase from the previous year.
All Others (18.1% of the total revenues): This segment’s revenues were RMB 47.02 billion ($6.6 billion), reflecting a 7% decrease from the previous year’s figures.
Operational Insights
In the fiscal third quarter, sales and marketing expenses came in at RMB 33.8 billion ($4.8 billion), marking an increase of 10.3% from the previous year and accounting for 13% of total revenues.
General and administrative expenses amounted to RMB 11.3 billion ($1.6 billion), marking a 9% uplift from the previous year and accounting for a 10 bps increase as a percentage of total revenues from the prior-year quarter.
Product development expenses stood at RMB 13.5 billion ($1.9 billion), showing a marginal 0.2% decrease from the previous year and accounting for a 100 bps contraction as a percentage of total revenues from the prior-year quarter.
Reflecting the tough quarter, operating income was RMB 22.51 billion ($3.2 billion), marking a 36% decrease from the previous year. The operating margin stood at 9%, contracting by 500 bps from the previous year.
Adjusted EBITDA increased 1% from the previous year to RMB 59.6 billion ($8.4 billion).
Financial Position & Cash Flow
As of Dec 31, 2023, cash and cash equivalents stood at $35.9 billion (RMB 254.8 billion), up from $33.4 billion (RMB 243.7 billion) as of Sep 30, 2023.
Short-term investments amounted to $42.3 billion (RMB 300.42 billion) at the end of the third quarter, an increase from $40.7 billion (RMB 296.8 billion) at the end of the second quarter.
Alibaba saw a surge in cash from operations, generating $9.1 billion (RMB 64.7 billion) in the reported quarter, compared to $6.7 billion (RMB 49.2 billion) in the previous quarter. The company raked in free cash flow of $7.96 billion (RMB 56.54 billion).
Zacks Rank & Stock Considerations
At present, Alibaba holds a Zacks Rank #3 (Hold).
For those eyeing the broader retail-wholesale sector, some noteworthy stocks to consider are Amazon (Zacks Rank #1), Fastenal , and Darden Restaurants (both with a Zacks Rank #2). While Alibaba’s shares have been on a downward trajectory, Amazon has seen an impressive 72.9% increase in shares over the past year.
Positive Momentum for Darden Restaurants, Inc. (DRI) Earnings
Stellar Performance Against Market Expectations
Darden Restaurants, Inc. (DRI) has recently posted its third-quarter fiscal 2022 results, revealing that the company’s earnings surpassed market expectations. The restaurant chain giant, with its popular brands like Olive Garden, LongHorn Steakhouse, and Cheddar’s Scratch Kitchen, has shown an impressive upsurge in stock value, gaining 16.8% in the same time frame as the earnings report.
Optimistic Projections for the Future
In the long-term, DRI is projected to maintain its growth momentum with an estimated 7.96% earnings growth rate. This positive trajectory further underlines the company’s potential for sustained success in the gourmet-dining landscape and can serve as an indicator for prospective investors in the segment.
Comparative Performance Analysis
The current strong performance of DRI stands in stark contrast to the disappointing earnings report of Alibaba Group Holding Limited (BABA), which experienced an outcome that fell below market estimates. The optimistic trajectory of Darden Restaurants, Inc. amidst the backdrop of other firms experiencing underwhelming performances aligns with the broader market trends in the food and beverage industry.
Potential for Further Growth
Darden Restaurants, Inc. (DRI) is poised for continued expansion and enhancement based on its positive performance and growth projections. The company’s robust financial standing and market position establish a promising outlook that could potentially yield substantial rewards for investors looking to capitalize on the growing consumer demand for high-quality dining experiences.
Concluding Remark
The recent financial revelations from Darden Restaurants, Inc. (DRI) underscore a prevailing optimistic outlook for the company and indeed the entire dining industry as a whole. As companies across different industries continue to rebound from the challenges of recent years, the success of DRI embodies a beacon of hope amid a highly competitive marketplace.
