Alibaba 2Q numbers - strong growth

Alibaba's 2Q numbers for the quarter ending on the 30 September. The Chinese internet company showed strong top line and bottom line growth.

Onto the numbers, revenue surged 55% (YoY) to $5.14 billion with strong growth coming from their smaller divisions. The media and entertainment division saw revenue up 302% to $541 million and the cloud computing division surged 130% to $224 million. The meat of the business, online retail was up 41% to $4.3 billion.

All the smaller divisions are still loss making as they spend money to grow their customer base as quickly as possible. The cloud computing division lost $58 million and the media and entertainment division lost around $330 million. The media and entertainment division is their Youku Tudou asset which they purchased last year for $4.4 billion dollars. Youku Tudou is the leading Chinese television internet company, picture Netflix meets Youtube. The loss in the division is due to investment in content creation.

The core of the business is still the ecommerce platforms, where they had user growth of 30% YoY of mobile MAU to 450 million people and annual active buyer growth of 14% YoY to 439 million people. Coupled with the strong user growth there has been good growth in average spending per user.



Their International commerce retail business grew by 178% to a relatively small $201 million in revenue. This is an area where there is huge growth potential, especially as they establish international logistics channels. For now though they are focusing on the Chinese home market which is still relatively young.

Currently the stock trades on a P/E of around 48 times, so not cheap. Going forward the analyst community is expecting big things, with a forward P/E of 23. Our preferred stock in the ecommerce space has been Amazon.com given their main operations being in the US and having a much simpler organisation structure. The e-commerce space is a sector that must form part of your portfolio.