Chinese e-commerce giant Alibaba reported strong sales growth and issued a bullish outlook for 2021. Although concerns about the coronavirus pandemic linger, changing shopping trends because of stay-at-home orders have given the company a big boost.
Alibaba (BABA) said Friday that revenue for its fiscal fourth quarter soared 22% to $16.1 billion, topping analysts’ forecasts. Operating profit, while down 19% from a year ago, also beat Wall Street’s estimates.
The company also predicted that sales for its next fiscal year could hit $91 billion, an increase of more than 25% from 2020.
Because China was the first country to get hit by the coronavirus pandemic, the results from Alibaba and other leading Chinese companies are telling. And they’re suggesting the economy is mounting a slow and steady comeback.
Alibaba’s mobile users grew at a steady clip, and sales for the company’s massive cloud computing business – which competes with similar services from Amazon (AMZN), Google owner Alphabet (GOOGL) and Microsoft (MSFT) – rose 58% from last year.
Chairman and CEO Daniel Zhang said those figures reflect changes fueled by coronavirus: “The pandemic has fundamentally altered consumer behavior and enterprise operations, making digital adoption and transformation a necessity,” he said. “”We are well positioned and prepared to help large and small businesses across a wide spectrum of industries.”
That includes merchants in the United States, where Alibaba has a growing presence helping small businesses list on its platform.
“Covid-19 has had a remarkable disruption on global small businesses, but the grit and ingenuity of US small businesses are driving growth on Alibaba,” said John Caplan, Alibaba.com president of North America and Europe in an interview with CNN Business.”Small businesses realize they need to get digital and go global.”
Shares of Alibaba were up slightly in premarket trading on the New York Stock Exchange Friday. The stock is flat for the year.
Renewed economic tension between the United States and China because of the Covid-19 crisis, has led some big Chinese firms to consider moving their stock listings off the NYSE and Nasdaq. Reuters reported this week that Chinese search engine Baidu (BIDU) may leave the Nasdaq.
“Tensions between the US and China have added another layer of uncertainty to the post Covid-19 world,” said Zhang. “Despite the uncertainties in the macroeconomic and the geopolitical environment, there is one thing that is certain. The world is moving towards digital-first and digital everything.”
Also, many Chinese companies are being scrutinized following the accounting scandal at Luckin Coffee (LK), which went public on the Nasdaq last year and has since plummeted. Nasdaq is seeking to delist the company’s shares.
This week the US Senate passed a bill that would crack down further on Chinese companies trading in America.
During a conference call with analysts Friday morning, Alibaba chief financial officer Maggie Wu said Alibaba will “closely monitor the development of this bill” but she added that Alibaba’s financial statements are prepared in accordance with US accounting standards.
“We will endeavor to comply with any legislation whose aim is to protect and bring transparency to investors who buy securities on US stock exchanges,” Wu said.