Alibaba Group Holding Ltd (BABA) stock is soaring in early trading on Tuesday, after China’s largest e-commerce retailer posted fiscal second-quarter results that handily beat both top- and bottom-line estimates.
Before Tuesday’s report, BABA stock was down 26% on the year, as investors worried about currency headwinds, counterfeit goods being hawked on its websites and, most of all, a sluggish Chinese economy.
But many of those fears were put to rest this morning — at least for the time being — as Alibaba let the numbers do the talking.
BABA stock was trading as much as 8% higher in premarket action.
It’s a Mobile World
BABA hauled in $3.49 billion in revenue last quarter, jumping 32% from the same quarter a year before and trumping the $3.38 billion Wall Street expected.
Non-GAAP diluted earnings per share clocked in at 57 cents, beating consensus estimates by 3 cents per share. EPS jumped 30% on a year-over-year basis.
I can understand why the BABA stock price is jumping this morning; not only were the results impressive, the way Alibaba achieved those results was encouraging. It appears Alibaba is getting really good at selling via mobile devices, something every major commerce company on the planet is trying to do.
Source: Alibaba
As you can see, mobile monthly active users (mobile MAUs) are growing rapidly. While monetizing mobile users is a pervasive problem, BABA is making serious strides here. Mobile revenue was up more than 100% year-over-year to $1.66 billion in Q2.
And its monetization rate on mobile users was 2.42% last quarter, up 12 basis points from the 2.3% in the year-ago quarter.
I must admit, I was wrong about this one. Convinced that the soft Chinese economy and emergent competition from JD.com (JD) and Vipshop (VIPS) would be Alibaba’s undoing, I took a bearish view of BABA stock going into earnings.
Instead it was my InvestorPlace colleague Larry Ramer who had it right, quoting a bullish Jack Ma and citing some encouraging recent macroeconomic data:
“According to Beijing’s official statistics, the country’s retail sales jumped 10.9% year-over-year last month, representing the highest growth since the beginning of 2015, Shanghai Daily reported.”
Alas, Ramer nailed it. Just like its closest Western analog, Amazon (AMZN), Alibaba crushed expectations and brought BABA stock along for the ride.
You’ve got to give credit where credit is due, and Alibaba definitely deserves some after its blowout Q2 report. While I’m still a little hesitant to call myself a believer, and I have some concerns about Alibaba’s corporate governance, I applaud BABA stock holders, who are being rewarded for their risk-taking today.
As of this writing, John Divine was long AMZN stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
