Weak forecast pulled Alibaba shares down

US, WASHINGTON (ORDO NEWS) — Shares of Alibaba Group Holding Ltd. fell after the Chinese e-commerce giant announced its earnings forecast. The company expects a slowdown in revenue growth this year, reflecting the economic uncertainty in China, as well as the impact of US-Chinese trade tensions, which could also negatively affect business.

Alibaba was down 4% in Hong Kong after falling almost 6% in New York. E-commerce giant predicts this year’s sales growth of at least 27.5% to more than 650 billion yuan ($ 91 billion), lower than the earlier forecast of 35% and slightly lower than analyst estimates. Despite the fact that in March the company’s revenue grew by 22% compared with the expected one and amounted to 114.3 billion yuan, this marked the slowest growth rate.

The negative effect was reinforced by the fact that the company set a goal to bring sales up to 650 billion yuan, which is a rather modest goal – it is one third less than the level that was set at the beginning of the year.

Online shopping began to recover in March, the company said. However, the current forecast shows that the second largest global economy has not yet fully recovered from the consequences of the COVID-19 pandemic, and consumers still do not want to spend a lot on goods, albeit with big discounts.

Asia’s most valuable corporation is also struggling with a growing number of competitors such as ByteDance Ltd. and Pinduoduo Inc. Alibaba also competes with Tencent Holdings Ltd. for leadership in various fields, from online media to payments and cloud computing. By the way, JD.com, the # 2 Chinese online retailer, predicts better-than-expected revenue for the quarter.

Alibaba has lost more than $ 70 billion in capitalization since the start of the coronavirus pandemic in January, and now it has to deal not only with the uncertain global economic environment, but also with any potential consequences of tensions in trade relations between China and the United States.

Alibaba also closely monitors developments related to the adoption by the US Senate of a bill aimed at removing from the quotation lists of American stock exchanges those Chinese companies that did not bring the accounting system in line with American standards.

For Chinese IT giants, the ability to trade on US exchanges provides access to additional sources of financing, but US lawmakers are trying to block these investment channels. Last week, US authorities issued a ban to the Federal Pension Fund on investments in assets of Chinese companies. The delisting initiative of Chinese companies must be approved by the US Congress and approved by the country’s president before it becomes a law in force.

“All these years, we have consistently sought to develop business in the long term … We will try to comply with any legislation whose purpose is to protect and ensure transparency for investors buying securities on American stock exchanges,” said Maggie Wu.

Alibaba’s March net profit was 3.2 billion yuan, up 88% from a year ago. In February, Alibaba announced the waiver of some service charges for financially troubled Tmall sellers. In April, the company launched a new 10 billion yuan subsidy program for Tmall users. These initiatives could lead to a further decrease in margin in June.

“The difficulty is for Alibaba to achieve the same growth this year,” said Steven Zhu, Shanghai analyst at Pacific Epoch. “Because the company is too big, it needs to spend a lot more effort.”

Alibaba executives are confident in the gradual recovery of the e-commerce sector throughout the year. In addition to the main line of business, ultimately, younger units, such as the cloud computing division, should also develop. The revenue of this business for the quarter jumped 58%.

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