Alibaba (NYSE: BABA) shares initially opened lower following its Q4 earnings report but recovered these losses by the end of the trading session, along with the rally in the equity markets. Overall, Alibaba's earnings were certainly disappointing as the company missed relative to analysts' expectations and had its slowest revenue growth in the company's history.
Of course, the bigger picture issue weighing on Alibaba's stock is the Chinese government's decision to enforce regulations and antitrust laws to curb the influence and growth of these behemoths. As a result, Chinese tech stocks started to move lower well before US tech. In total, Alibaba is down by more than 66% from it's all-time high in November 2020.
Inside the Numbers
In Q4, Alibaba reported $2.65 in earnings per share which were 23% lower than last year and about 3% below analysts' estimates. Revenue also came in about 2% lower than expectations at $38.1 billion, a 10% increase from last year. Notably, this is Alibaba's slowest growth rate in its history and reflects its larger struggles.
Some of the issues affecting Alibaba are slowing consumer spending due to inflation and a decelerating economy. Another is that there is more competition in e-commerce.
The company has been using its cash to buyback shares, indicating it sees its stock as undervalued. Last quarter, the company bought back about $1.4 billion of shares. It also has about $50 billion in cash.
Overall, Chinese revenue declined by 20%. Another factor is that the company faced tough comps as the lockdowns last year led to increased use of online services. International revenue grew by 18%.
The company is also seeing a deceleration in its cloud unit which saw a 20% growth rate after last quarter's 33%. One factor is that one of its largest customers - ByteDance - has moved off Alibaba. Due to China's regulatory crackdown on certain industries, other industries are spending less on tech services as well.
In a vacuum, Alibaba's shares are very attractive. Taking $50 billion out of its $300 billion market cap gives you $250 billion. And, it should earn about $20 billion in 2022 which makes the stock very cheap especially given its exposure to growth industries like e-commerce, AI, and cloud computing.