Alibaba Drops to Six-Week Low on Weaker Outlook for 2012 Result
November 28, 2011, 9:44 AM ESTBy Bloomberg News
Nov. 25 (Bloomberg) -- Alibaba.com Ltd., a unit of China’s biggest e-commerce company, fell to its lowest in six weeks after saying its sees “weakness” in membership subscriptions and higher investment costs affecting next year’s results.
Alibaba shares dropped as much as 7.9 percent in Hong Kong trading to HK$8.18, the lowest level since Oct. 14, and changed hands at HK$8.29 as of 10:40 a.m. in the city.
The company said yesterday there may be “a short-term impact on next year’s financial performance, as the revenue from our membership subscriptions may continue to show sign of weakness.” Alibaba will still need to make investments in new business.
“Growth is muted and we see pressure on profitability,” Kelvin Ho, a Hong Kong-based analyst at Yuanta Securities Co., said in a phone interview today. “Perhaps earnings will drop next year, year-on-year. Their business transition will take longer than expected.”
Yuanta downgraded shares of Alibaba to “hold” from “buy” after yesterday’s conference call.
The company is projected to report a 6.4 percent rise in net income next year to 1.83 billion yuan ($287 million), from an estimate of 1.72 billion yuan this year, the average estimate of 15 analysts surveyed by Bloomberg.
Alibaba said yesterday third-quarter net income increased to 410 million yuan from 366.1 million yuan a year earlier, matching the 410.1 million yuan average of eight analyst estimates compiled by Bloomberg. Revenue rose 11 percent to 1.6 billion yuan.
“We believe the global economy will remain volatile in the coming few quarters, and believe that it may have a prolonged impact on China export sector,” Maggie Wu, Alibaba’s chief financial officer, said on the call yesterday. “We are cautious on major buyer markets like the U.S. and Europe. Also, under the current complex macro-conditions it may take a considerable amount of time before China domestic consumption can achieve strong growth.”
--Edmond Lococo. Editors: Anand Krishnamoorthy, Terje Langeland
To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
