What’s going on here?
Alibaba’s underwhelming results, out on Thursday, suggested the firm’s hit a dead end – but its listing plans could help it reverse.
What does this mean?
China’s economy might be dusting itself off, but spending on physical goods (real, tangible things) seems to be on an extended sabbatical – and that’s stoking fears that the country’s long-awaited consumer spending boom could still be miles off. That cold spell might explain why Alibaba – which earns most of its money from Chinese commerce – saw single-digit revenue growth again last quarter, falling just shy of analysts’ estimates. But it’s not all woe: Alibaba thinks online commerce is starting to shake off the cobwebs now, with a healthy appetite for fashion and healthcare products helping domestic momentum speed up in March.
Why should I care?
Zooming in: A bumper breakup.
Investors have been perched on the edge of their seats ever since Alibaba announced it’s splitting into six distinct business units. And that’s no wonder: this shift could make the individual segments more nimble – potentially turbo-charging growth, and maybe even triggering a share rebound. That prospect meant analysts were pretty gung-ho when the firm announced a spin-off plan for its $12 billion cloud business, the nation’s biggest: after all, there’s every chance the venture could be a success, especially if the booming demand for Tongyi Qianwen, Alibaba’s answer to ChatGPT, is anything to go by.
For markets: The Big Long.
Chinese stocks are in a bit of a freeze right now, with investors getting cold feet as the country’s rebound slows: in fact, average foreign trading volumes are currently less than a tenth of January’s record highs. But some true contrarians are backing the country. Filings out this week showed that Michael Burry – the man who accurately predicted the global financial crisis – has seriously upped his bets on Alibaba and JD.com.
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