BABA Stock Alert: The REAL Reason Alibaba Is Trending Today

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  • Alibaba (BABA) stock is trending today because the company announced the details behind the spin off of its cloud unit.
  • The unit is expected to be spun off within a year.
  • BABA reported weaker-than-expected Q1 results.
BABA stock - BABA Stock Alert: The REAL Reason Alibaba Is Trending Today

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Chinese conglomerate Alibaba (NYSE:BABA) is a popular name today, but not because it reported weaker-than-expected first-quarter results. Instead, BABA stock is trending on social media because the firm disclosed details of the spinoff of its cloud business.

Alibaba’s Cloud Intelligence Group will be spun off through “a stock dividend distribution” to the owners of BABA stock, the conglomerate announced. The company expects the unit’s separation to be completed within a year.

Alibaba’s announcement comes after it stated in March that it would divide itself into six parts. At the time, BABA said that it was adopting the strategy in order to “unlock shareholder value and foster market competitiveness.”

Today, BABA CEO Daniel Zhang commented, “In an increasingly complex world, we have proactively transformed our organization to strengthen the competitiveness of our businesses through greater independence

Zhang is slated to become CEO of the Cloud Intelligence unit.

 BABA Stock: Alibaba’s Q1 Results

The conglomerate’s top line climbed 2% versus the same period a year earlier to 208.2 billion Chinese yuan. That;s below analysts’ average estimate of 210.2 billion yuan.

BABA’s earnings per share, excluding some items, jumped 35% year over year (YOY) to 1.34 yuan. However, its EPS came in 0.74 below the mean estimate. It generated free cash flow of $4.7 billion.

The revenue of its cloud unit dropped 3% YOY, and the division generated a loss of 910 million yuan. The company stated that it intends to integrate artificial intelligence “across [its cloud] ecosystem in the near future.”

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


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