Alibaba Group (BABA), a leading figure in China's economic landscape, is set to experience a significant upturn in its performance and outlook for 2024. This optimistic forecast is rooted in a combination of strategic business decisions and broader economic factors.
Economic Recovery as a Catalyst:
The year 2023 marked a period of slower-than-expected growth for China's economy. However, this has set a low base for 2024, creating an environment ripe for stronger growth. Alibaba, often seen as a bellwether for the Chinese economy, mirrors this trend. The company's performance in 2023, while subdued, has laid the groundwork for a robust recovery in 2024.
Strategic Business Restructuring:
In a significant move, Alibaba announced a new business strategy in 2023, adopting a “1+6+N” structure. This shift involves a strategic withdrawal from some of its investments in over 300 companies. To date, Alibaba has exited investments in at least eight domestic listed companies. This refocusing on core business areas is expected to streamline operations and enhance profitability.
Financial Projections and Performance:
Based on current data and models, Alibaba's revenue for the third fiscal quarter of 2024 (FY3Q24E) is projected to be RMB 272.6 billion, a 10.0% year-over-year increase. This figure surpasses the consensus estimate of RMB 270.1 billion (9.0% Y/Y). Factors contributing to this positive outlook include reduced marketing spending and lower losses from divested companies.
Revenue Breakdown:
China Domestic Retail: The customer management segment is expected to reach RMB 95.6 billion, up 4.4% Y/Y. Commission revenue is projected to increase by 2.0% Y/Y to RMB 23.4 billion, while advertisement revenue is estimated at RMB 72.2 billion, a 5.5% Y/Y increase.
Direct Sales and Others:
This segment is expected to grow by 3.2% Y/Y, a slight decrease from the 5.3% Y/Y growth in FY2Q24. GMV Insights - Taobao and Tmall: Alibaba's Gross Merchandise Volume (GMV) on Tmall and Taobao is expected to reach RMB 2,566 billion in FY3Q24E, marking a 2.8% Y/Y increase. Tmall's GMV is projected to grow by 3.6% Y/Y, driven by strong performance in household products and sports & outdoors. Taobao's GMV is anticipated to increase by 1.9% Y/Y, with significant contributions from household products, sports & outdoors, and baby, children & maternity segments.
Global Reach and Competitiveness:
Alibaba's international presence, particularly through its platforms like Temu, has seen remarkable growth. Temu's popularity has surpassed that of competitors like Shopee, indicating Alibaba's expanding global influence and market competitiveness.
In conclusion, Alibaba's strategic refocusing, coupled with the anticipated economic recovery in China, positions the company for a strong performance in 2024. These developments are likely to enhance investor confidence
and solidify Alibaba's status as a key player in the global e-commerce and tech industry.
