Alibaba Reports Mixed Q2 Results; Shares Fall Pre-Market

Chinese multinational technology firm Alibaba (BABA) has reported mixed financial results for the second quarter of 2021. The company offers online business-to-business, business-to-consumer and consumer-to-consumer sales services. It also provides cloud computing services, shopping search engines and electronic payment services.

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Adjusted earnings per share (EPS) increased 12% year-over-year to $2.57, beating the Street’s estimate of $2.24. Quarterly revenue grew 34% to $31.87 billion, but fell short of analysts’ expectations of $32.54 billion.

Cloud computing revenue surged 29% year-over-year to $2.5 billion, driven by strong revenue growth in retail, financial services and Internet industries. Revenue from the digital media and entertainment segment rose 15% to $1.3 billion. Youku’s daily average subscriber base climbed 17% during the quarter.

Annual active consumers totaled around 1.18 billion for the twelve months ended June 30, reflecting an increase of 45 million from the twelve months ended March 31. (See Alibaba stock chart on TipRanks)

The Chief Financial Officer of Alibaba, Maggie Wu, said, “We are investing our excess profits and additional capital to support our merchants and invest in strategic areas to better serve customers and penetrate into new addressable markets.”

The company’s shares gained 2.5% to close at $200.09 on Monday.

Last month, Arete Research analyst Richard Kramer reiterated a Hold rating on the stock and lowered the price target to $192 from $250 (4% downside potential).

In a research note to investors, the analyst said, “Companies are still exposed to incremental risk around the data privacy law, and the next phase will focus on how firms reform practices or how the Chinese government enforces regulations.”

Overall, the stock has a Strong Buy consensus based on 22 Buys, 2 Holds and 1 Sell. The average Alibaba price target of $284.87 implies 42.2% upside potential. The company’s shares have lost 24% over the past six months.