Alibaba Group reported better than expected earnings and revenue in the third quarter ending December. Despite this, its stocks were down on the bourses due to fears of Coronavirus impacting its business. Alibaba stock (ticker: BABA) was down 2% to 1.7% in recent trading.
The Alibaba Group saw year on year revenue growth of 38 percent. The revenue was $23.2 billion (61.5 billion yuan) for the quarter, while net income rose 58% to 52.3 billion yuan. The earnings were much in-line with the estimates of analysts. But fears of the virus and fresh reports of outbreaks are swinging the numbers on the bourses and keeping investors on the sidelines.
Alibaba's CEO, Daniel Zhang, described the virus as a "black swan" event in the company's earnings call, and said that it posed "near-term challenges" for the company. Zhang explained that the outbreak had forced the factories and retail outlets to stay closed longer beyond the Lunar New Year break. Chinese merchants and logistics companies are still not fully functional, with the government getting stricter about people going out in the crisis.
Alibaba is known as the Amazon of China, and CEO Zhang, says for the last two weeks they have been unable to meet the delivery targets and many packages are lying undelivered. “Orders to restaurants food delivery firms and other local services have declined noticeably,” he added.
"The epidemic has negatively impacted the overall China economy, especially the retail and service sectors," said Chief Financial Officer Maggie Wu also on the conference call after the results. "While demand for goods and services is there, the means of production in the economy has been hampered by the delayed opening of offices, factories, and schools after the Lunar New Year's holiday."
Zhang said that it was too soon to quantify the impact of the virus on Alibaba Stock, but the company was closely monitoring the situation.
Zhang said the company was procuring medical supplies from all over the world, and Alibaba had already supplied 40 million units to Wuhan and other affected cities.
Alibaba has been weathering the storm of the Coronavirus better than other Chinese companies. The outbreak has already affected tourism, trade, supply chains, and exports of tech ancillaries in China. Some of the biggest falls in indices were seen in companies connected to China.
Many banks and rating companies have lowered their coming quarter forecast for China.
David Madden, market analyst at CMC Markets, said to Reuters, ” China’s the world’s largest importer of oil so the renewed fears about the health crisis have hit stocks like BP and Royal Dutch Shell. Mining stocks such as BHP, Rio Tinto as well as Anglo American are lower too. It has been a double whammy for the FTSE 100 as the drive higher in sterling has dented internationally focused stocks like GlaxoSmithKline, AstraZeneca, plus Unilever."
HSBC lowered its first-quarter forecast for China’s economic growth to 4.1% year-on-year from 5.8% due to the fallout from Coronavirus.
HSBC also lowered its full-year estimate for global growth to 2.3% from 2.5%. It says the first quarter of all companies will feel the brunt of the virus on their earnings.