Alibaba’s Incredible Shrinking Profit Growth 阿里巴巴盈利呈加速放缓趋势

By newsdoug on November 26, 2011

Alibaba's incredible shrinking profit Leading B2B e-commerce platform Alibaba.com (HKEx: 1688) has become skilled at putting out its results during times when the least people are watching, as it aims to deflect investor attention from the fact that its profit growth is following a worrisome shrinking pattern. It released its first quarter results in May at the height of its headline-making spat with 40 percent stakeholder Yahoo (Nasdaq: YHOO), and now it has just released an extremely lackluster third-quarter report over the US Thanksgiving holiday, when New York markets are closed and most investors are unlikely to see the results when they get back to work next week. (English article; Chinese article) There’s good reason it doesn’t want too many people to see these results: they show that its third-quarter profit grew at an anemic 12 percent, even after it implemented steep price hikes for merchants who trade on its site in a bid to reignite growth as the actual number of merchants started to fall. (previous post) The 12 percent figure was less than half of the second-quarter’s 28 percent profit growth rate, which itself was down sharply from the first-quarter’s 37 percent growth rate. Do we see a trend here? Profit growth seems to be dropping by 10-15 percentage points each quarter, meaning we might actually see single-digit or no growth in the fourth quarter as the company’s prospects fade. Investors seem to have realized that Alibaba.com’s heady growth days are finished, at least for the next year or 2, as there don’t appear to be any real new growth engines for the company in that time frame. The latest results were actually in line with market forecasts, reflecting investors low expectations for the company, and Alibaba.com shares themselves are trading at half the levels of their 52-week high. Unless it can find some new magic soon, which appears unlikely, look for this stock to be stuck in the doldrums for quite some time and perhaps to even fall further still if a serious, more innovative competitor appears.

Bottom line: Alibaba.com’s profit growth will stall in the fourth quarter and into 2012, as it struggles for new revenue sources amid stagnation at its core B2B trading business.

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