Alibaba Shares Soar on Stellar Guidance at Company’s Investor Day

Alibaba (BABA)  Chief Financial Officer Maggie Wu got a round of applause from the crowd at the company’s annual investor day in Hangzhou, China on Thursday after forecasting 2018 revenue growth up to 12 percentage points higher than analysts were expecting. 

At the first day of the two-day meeting, the dominant Chinese online retailer forecast revenue to grow 45% to 49% in 2018, vs. the FactSet consensus estimate of 37%. “Despite having a larger [business] base, we continue to accelerate our revenue growth,” Wu said, in reference to the company expanding into different verticals, such as cloud computing and digital media and entertainment. 

The stock is spiking this morning, up more than 11% to $139.76 in early trading. Year to date, the stock is up more than 60%, vs. the S&P 500’s increase of 9%. Meanwhile Chinese competitor Tencent (TCTZF) is up 43% in 2017 and U.S. competitor Amazon (AMZN) is up 35% this year. 

BABA Chart

Morningstar CFA R.J. Hottovy said the big news is clearly the surprise revenue guidance. “This implies accelerating organic revenue year-over-year (after adjusting for Youku and Lazada), which is impressive at this point in Alibaba’s history and underscores all the various ways they can monetize their data,” he said.

In the past year ended March 31, the company absorbed video site Youku and Southeast Asian e-commerce platform Lazada, which helped spur the 56% revenue growth for the year to $23.3 billion, which it reported in May. After adjusting for the two business consolidations, revenue growth would have been about 44% to 45%. At last year’s investor event, Alibaba had originally forecast revenue growth for this past year to grow 28% and later revised it up to 53%.

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The company’s opportunity to monetize big data, or large data sets that can be analyzed to reveal patterns, gives it an edge over its competitors, Alibaba Head of External Affaris Brion Tingle said. Alibaba can use this data to boost sales by determining what customers want most. 

The other big takeaway from the first day of the company’s two-day event is that Alibaba’s ambitious target for its 2020 gross merchandise value, or the total value of merchandise sold over a period of time, is beginning to look more plausible as the company integrates Lazada and continues to expand outside of China, Hottovy said.

At the event, Alibaba CEO Daniel Zhang reiterated Alibaba’s $1 trillion GMV target for 2020. This past year, GMV came in at $547 billion, up 18% from the year prior when it came in at $463 billion. To reach $1 trillion in the next three years, GMV will need to increase 82.8% from this year’s figure. 

When I interviewed $BABA at #DeliveringAlpha last year i became a believer at $93.

— Jim Cramer (@jimcramer) June 8, 2017

At the second and final day of the event on Friday, Alibaba founder and executive chairman Jack Ma and executive vice chairman Joe Tsai will speak. The event begins at 3:45 a.m. ET. You can watch the live webcast or a replay of the webcast by following this link