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Alibaba stock shoots higher after company beats on earnings, says business improved in June

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Shares of Alibaba Group Holding Ltd. were rising more that 5% in premarket trading Thursday after the Chinese e-commerce company topped expectations with its latest financials and indicated that business trends improved as the June quarter wore on.

The company posted net income of RMB22.7 billion ($3.4 billion), or RMB8.51 per American depositary share, compared with RMB45.1 billion, or RMB16.38 per ADS, in the year-earlier period. After adjustments, Alibaba
BABA,
+3.35%

earned RMB11.73 per ADS, down from RMB16.60 per ADS a year before but ahead of the FactSet consensus, which was for RMB10.70 per ADS.

Revenue of RMB205.6 billion was essentially flat with the year-earlier total of RMB205.7 billion, though technically it marked Alibaba’s first-ever year-over-year decline in revenue. Analysts tracked by FactSet were expecting RMB203.5 billion.

“Following a relatively slow April and May, we saw signs of recovery across our businesses in June,” Chief Executive Daniel Zhang said in a release. “We are confident in our growth opportunities in the long term given our high-quality consumer base and the resilience of our diversified business model catering to different demands of our customers.”

Chief Financial Officer Toby Xu added that Alibaba has “narrowed losses in key strategic businesses given ongoing improvements in operating efficiency and increasing focus on cost optimization.”

Alibaba generated RMB 141.9 billion in revenue from its China commerce business, down from RMB144.0 billion a year before.

The company posted RMB17.7 billion in cloud-computing revenue, marking 10% growth relative to a year earlier.

Alibaba’s latest earnings report comes amid a tumultuous period for the Chinese e-commerce giant, which is not only dealing with competitive and macroeconomic pressures, but now also faces a delisting threat from the Securities and Exchange Commission.

The SEC late last week named Alibaba among a list of foreign companies whose auditing processes weren’t able to be fully inspected by the Public Company Accounting Oversight Board. The company faces the risk of being delisted from the New York Stock Exchange if its audit processes can’t be properly inspected or investigated by the PCAOB for three straight years.

Alibaba executives said earlier this week that they would “strive to maintain [the company’s] listing status on both the NYSE and the Hong Kong stock exchange.” The company then announced late Wednesday that it was adding Irene Yun-Lien Lee, the chairman of Hysan Development Company Ltd. and Albert Kong Ping Ng, the former chairman of Ernst & Young China, to serve as independent directors on its board.

“The new appointments demonstrate the Company’s commitment to corporate governance excellence and diversity at the board level,” Alibaba said in that release.

Alibaba’s stock has lost 5.6% over the past three months through Wednesday, while the iShares China Large-Cap exchange-traded fund
FXI,
+0.84%

has shed 5.2% and the S&P 500 index
SPX,
+1.56%

has declined 3.4%.

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