Glutton For Punishment

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What's going on?

China’s Alibaba posted better-than-expected quarterly sales on Thursday, but a record-breaking fine for the very, very naughty ecommerce platform gave its profitability a spanking.

What does this mean?

Shoppers might not have been able to head to the mall during the pandemic, but virtual stores like Alibaba’s were bustling. That resulted in an expectation-beating 64% surge in quarterly revenue for the company. And it seems to think that trend’s only going to keep going: its sales forecast for the next 12 months beat analysts’ estimates too.



Too bad, then, that it fell into loss-making territory for the first time since 2012. That was mostly down to the $2.8 billion slap on the wrist it received last month from Chinese regulators for “monopolistic behavior”. Throw in the turbulent time tech stocks are facing these days, and investors steered well clear.

 

 

Why should I care?

For markets: Alibaba isn’t out of the woods yet.


The fine – the biggest of its kind in history – marks the end of a four-month probe into Alibaba, but the threat of further action could cast a shadow over its shares for some time to come (tweet this). Regulators, after all, are still hassling payments giant Ant Group, in which Alibaba holds a roughly 33% stake. That might be why Alibaba’s US-listed shares have underperformed the tech-heavy Nasdaq by 4% since the fine was announced, even as the index suffers from an exodus of inflation-nervous investors.



The bigger picture: Coupang misses the mark.


South Korea’s ecommerce frontrunner Coupang admitted at its first update since its stock market debut that it was struggling with profitability too. Coupang reported growing losses despite the online sales boom, in part because it’s been spending more on hiring drivers and expanding its network of fulfilment centers. And as long as it prioritizes growing its market share by lowering product prices and delivery fees, some analysts reckon those losses aren’t about to reverse anytime soon.

Originally posted as part of the Finimize daily email.

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