(Bloomberg) – Shares of Alibaba Group Holding Ltd. rose after the Chinese e-commerce giant unveiled a new takeover plan and suggested Covid-19 restrictions would begin to ease enough to benefit its business.
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The stock rose 6.4% in Hong Kong on Friday morning.
Alibaba reported a surprise net loss for the quarter as it cut its investment holdings, but it offered support for investors on other fronts. The company approved a $15 billion extension to an existing $25 billion buyout program while extending the term through 2025. Executives also expressed optimism that pandemic restrictions might be lifted. .
“With the introduction of the 20-point pandemic measures by state authorities, this can be expected to have a positive impact. We certainly still note logistics disruptions in some parts of the country,” chief executive Daniel Zhang told analysts on a post-earnings conference call. “But overall we expect things to continue to improve in a positive direction.”
China’s e-commerce leader reported a net loss of 20.6 billion yuan ($2.9 billion) against forecasts of a profit of almost the same amount, after writing down the value of investments in a portfolio including Didi Global Inc. and GoTo in Indonesia. Adjusted EBITDA rose 24% for the quarter, a metric Jefferies analysts pointed to as a sign of progress.
“We consider it to be in a good place to embrace the story of the upcoming reopening, thanks to its huge and engaging user base with the pursuit of successful customer segmentation strategies coupled with broad product selections. “wrote the Jefferies analysts.
Alibaba seen as story of recovery despite missed revenue: Street Wrap
Revenue rose slightly less than expected 3% to 207.2 billion yuan in the September quarter, after cloud sales – the company’s biggest growth engine of late – hit their stride the slowest ever recorded.
Still, investors are pointing to signs that Xi Jinping’s administration is pulling back from its Covid Zero framework and increasingly backing tech companies. Although it is still early days, some metrics suggest renewed interest in unleashing the private sector and reviving the world’s second-largest economy.
“We believe that Covid will eventually pass, our society, our economy and our lives will eventually return to normal, and China’s massive potential as the world’s second-largest economy will be further unleashed,” Zhang said.
Bernstein analysts including Robin Zhu have summoned Shakespeare to capture the drama of Beijing’s Covid politics. “Everyone is a reopening play?” they wondered in a report after Alibaba’s earnings.
“All Chinese ADRs are a reopening game, all local governments are just players; they have their exits and their entrances; and a man in his time plays several roles…”, they write.
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