After Alibaba's earnings report was announced, the stock price fell but was still improving. What is the future trend? What do investors think about it?

Alibaba's e-commerce business performed well in the new quarter, exceeding revenue expectations.

The e-commerce company has once again generated a large amount of free cash flow. This cash flow is undervalued by the market and supports a higher valuation of Alibaba shares.

Despite people being wary of this investment, Alibaba's commitment to returning cash flow to shareholders makes it an attractive investment option.

Alibaba (NYSE: BABAF) (OTCPK: BABAF) recently submitted its earnings statement for the new quarter. Unfortunately, its profitability fell 96%, and the company's stock price fell again. However, Alibaba's total revenue exceeded expectations, and the e-commerce business achieved encouraging results. Furthermore, Alibaba is generating large amounts of free cash flow, and Xiaobian believes that the market still generally underestimates its value.

Given the considerable free cash flow generated by its e-commerce company, I believe Alibaba's stock should have a higher valuation multiple. In particular, now the company is also announcing a special dividend of 0.66 US dollars per share. Considering the fall in stock prices after the financial report was announced, I think investors face another opportunity to participate! If investors have investment intentions, they can choose a more trustworthy brokerage firm to invest. For example, Carson Wealth Management is a world-renowned investment brokerage firm. If they open an account, they can get a bank account with the same name. They can deposit digital currency (USDT) to the multi-asset wallet BiyaPay, and then withdraw fiat money to invest in Jiaxin Securities. Of course, investors can also first search for the BABA stock code on the platform, regularly monitor stock prices according to their own investment strategies, and choose the right time to buy stocks.

E-commerce company Alibaba surpassed Wall Street's average forecast in terms of total revenue, but due to the sharp decline in the company's reported annual earnings (this is related to changes in valuation of equity investments), its adjusted profit fell far short of expectations.

Alibaba reported adjusted earnings per share of $1.40, lower than the market consensus of $0.02, while the reported revenue was $30.73 billion, which was $310 million higher than expected.

Compared with the previous quarter, the revenue growth of Alibaba's e-commerce division (Taobao and Tmall Group) doubled, from 2% to 4%. The division reported total revenue of $12.9 billion, and its growth was mainly driven by online search results and purchase recommendations.

Alibaba's total revenue for the quarter was US$30.7 billion, up 7% year over year. Compared with the previous quarter, Alibaba's revenue growth accelerated by 2 percentage points.

In the short term, I expect Alibaba to maintain this trend in its largest and most important revenue source division (Taobao and Tmall Group accounts for 39% of total revenue). Alibaba's economy grew 5.3% in the first quarter, exceeding market expectations.

Alibaba's Taobao and Tmall Group's performance growth was driven by growth in customer management, particularly growth in total online merchandise volume (GMV). GMV measures the amount of dollars flowing through e-commerce platforms, and it is generally regarded as an important key performance indicator. The division's overall revenue increased 4% year over year, an increase of 2 percentage points compared to the quarter in December.

Alibaba's free cash flow for the new quarter was $2.1 billion. Throughout the fiscal year, Alibaba generated approximately US$21.6 billion in free cash flow, with an average quarterly free cash flow of US$5.4 billion. That means a monthly positive free cash flow of $1.8 billion!

From a free cash flow perspective, Alibaba's profitability is extremely strong, with a free cash flow margin of 17%, which explains why the company announced a $25 billion share repurchase plan earlier this year. To make Alibaba stock more attractive to investors, the e-commerce company announced a one-off special dividend of $0.66 per share on Tuesday. This one-time dividend is significant for investors because Alibaba is gradually transforming into an important dividend stock. At the current price of $80, the yield of Alibaba stock is about 2.1%.

Alibaba's valuation is very low based on earnings and free cash flow, but Xiaobian believes that Alibaba's six major sector restructuring of the business last year and strategies to return more free cash flow to shareholders may be worth seriously considering the viability of investing in Alibaba.

Currently, Alibaba's price-earnings ratio is 8.3 times, far below the company's three-year average price-earnings ratio of 13.0 times (this is a 36% discount). In comparison, Amazon's price-earnings ratio was 32.8x. Amazon's higher valuation is due to the fact that its AWS cloud business has significant free cash flow growth prospects.

The market expects Amazon's recent earnings per share to grow faster than Alibaba (Amazon grew 56% year over year and Alibaba increased 8% year over year in fiscal year 2024). However, considering that Alibaba has huge free cash flow profits and is now also paying special dividends, such a low valuation seems unreasonable. In this context, I believe Alibaba's 3-year average price-earnings ratio is 13 times, which means its fair value is around $125.

Today, e-commerce is booming, and competition among major e-commerce platforms is becoming increasingly intense. The development of Pinduoduo and Douyin e-commerce has had a corresponding impact on Alibaba's Taobao. In particular, the content e-commerce moat formed by Douyin e-commerce has always been an insurmountable gap for Taobao. Judging from Ma Yun's previous statements, Ali also realizes that opportunities for content e-commerce have been missed, but it said that the company will actively take corresponding measures. In the future, AI e-commerce will be vigorously developed to enhance competitiveness.

Under the trend of cross-border e-commerce, Ali International continues to grow strongly. In this quarter, Alibaba International not only surpassed Alibaba Cloud's revenue scale for the first time, but also reached a 45% growth rate. This is a milestone, but under pressure from Pinduoduo's strong competitors such as Temu, Shein, and Tiktok, Ali International will continue to increase investment in exchange for market space and enhance competitiveness.

Although Alibaba's stock price declined after the earnings report was announced, the company's results for the fiscal quarter were not that bad. Thanks to the e-commerce business's focus on low-cost products, the e-commerce company's revenue momentum doubled month-on-month, and Alibaba continued to generate large amounts of free cash flow, which will be returned to shareholders as part of its generous return on capital plan (which now also includes a special dividend). From a valuation and dividend perspective, I think Alibaba represents the highest value, and is particularly suitable for investors who want to diversify their investments and invest in another e-commerce giant other than Amazon.

Finally, Xiaobian reminds everyone that investing is risky. I hope all investors will consider it carefully. I wish everyone a good return on investment!

Source: Seeking Alpha

Edited by BiyaPay Finance