In This Article:
Key Points
-
Alibaba reported its latest quarterly earnings, missing big on its top and bottom lines.
-
The company's core business is growing, but more slowly than expected, due mainly to instability in the Chinese economy.
Shares of Alibaba (NYSE: BABA) are plunging on Thursday. The company's stock was down 7.9% as of 12:43 p.m. ET and fell as much as 8.3% earlier in the day. The steep decline comes as the S&P 500 (SNPINDEX: ^GSPC) edged up 0.3% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was up 0.1%.
The Chinese tech giant reported quarterly earnings that fell significantly short of Wall Street's expectations.
Alibaba misses earnings targets
Alibaba reported weaker-than-expected results for the quarter ended March 31. Its net income of $1.71 million (12.38 billion Chinese yuan) was well below analysts' expected $2.93 billion. Revenue grew 7% year over year to $32.58 billion, also falling short.
Growth slowdown raises concerns
The 7% revenue growth rate is less than previous quarters, pointing to a deceleration and highlighting issues in Alibaba's core e-commerce business. The Chinese economy isn't recovering the way many investors had hoped, and consumer spending has not returned to levels analysts had forecast.
Alibaba also faces increased competition from JD.com and Temu domestically, while AliExpress, Alibaba's international marketplace, is reeling from the U.S.-China trade tensions. AliExpress also faces competition from Temu and Shein, as well, of course, from Amazon.
The short term could be bumpy
While Alibaba faces significant challenges in the near term, the company is making significant investments in artificial intelligence (AI) and building for the future. Still, with a rocky domestic economy and international trade wars, the company's stock could struggle for some time. However, long term, I think Alibaba will succeed, and with a price-to-earnings ratio (P/E) a little over half of that of Amazon, its stock is attractively priced.
Should you invest $1,000 in Alibaba Group right now?
Before you buy stock in Alibaba Group, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alibaba Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $620,719!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $829,511!*
Now, it’s worth noting Stock Advisor’s total average return is 962% — a market-crushing outperformance compared to 170% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.