Alibaba Group Holdings Ltd. reported revenues and revenues that failed Wall Street's expectations, and shares were down on Thursday, despite the Chinese-based e-commerce giant's attempts to influence how the results were reported.
The company reported net result attributable to ordinary shareholders who decreased 41% to 8.69 billion renminbi (RMB), or RMB 3.30 a share, of RMB 14.68 billion, or RMB 5.65 a share, in the same period a year ago. The company said that, according to the US dollar, the net result was the equivalent of $ 1.31 billion, with earnings per share of 50 cents.
Alibaba provided "non-GAAP diluted EPS", which excludes non-recurring items, and which reporters typically compare with analysts' expectations, from RMB 8.04 – equivalent to $ 1.22 – an increase over RMB 7.95. a year ago.
shot up to 4.9% shortly after opening, before the rate reversed and dropped 0.9% in mid-day trading, with a number of news services reporting that Alibaba had reported earnings forecasts, although the typical recovery reports would suggest that this is not the case. case.
A representative of the company contacted several MarketWatch reporters last week and explained why the terms in terms of renminbi, rather than dollar, should be compared with estimates from analysts.
The spokesman's claim was that since Alibaba and FactSet convert their respective numbers into US dollars using exchange rates taken at different times, comparing US dollar equivalents would be like comparing apples and oranges. MarketWatch always compares company results with estimates of analyst consensus collected by FactSet.
The Securities and Exchange Commission does not provide a standard guide to revenue releases with respect to income in a home currency versus the US dollar. Other companies that report in two currencies are Petrochina Co. Ltd.
, BP PLC
and Petrobras of Brazil
Ironically, the FactSet consensus for non-GAAP EPS in US dollars was $ 1.21, meaning that Alibaba would have been defeated, but the EPS consensus in terms of renminbi was 8.28, meaning that Alibaba missed expectations.
Alibaba also contacted FactSet to inform the exchange rate differences. In FactSet's "surprise history" page, in which FactSet converts the results in an attempt to compare apples with apples, the non-GAAP EPS reported by Alibaba was reported as $ 1.17, making the average analyst estimate of $ 1.21 was missed.
Some news sources reported that Alibaba had surpassed earnings expectations – and it did so, if you compare the net EPS figures with GAAP analyst estimates; the consensus of FactSet GAAP EPS was RMB 2.42, or 35 cents on a dollar basis. However, earnings reports rarely compare net EPS with analyst GAAP estimates when non-GAAP numbers are available, so it is noteworthy that some publications and news services chose to do this time.
The reason that non-GAAP numbers are usually compared with analysts' estimates is that the majority of the companies providing advice give non-GAAP guidelines, so that is what analysts have to work with to give estimates.
In 2017, the 340 components of the S & P 500 that served as guidance were 277 non-GAAP guidelines and 220 GAAP guidelines, according to a report from Audit Analytics. Of those totals, 120 companies only gave non-GAAP guidelines, while 63 companies only issued GAAP guidelines, the report said.
In the case of Alibaba, 24 analysts provided non-GAAP EPS estimates in renminbi and 17 analysts provided GAAP-EPS estimates.
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Meanwhile, Alibaba's revenue grew, for which there is no non-GAAP or comparison, 61% to RMB 80.92 billion – or $ 12.23 billion – and missed the faction-renminbi consensus of $ 81.37 billion , but beat the dollar estimate of $ 11.89 billion.
Some news sources reported that revenues in the renminbi outperform expectations, but that is because they used different analyst estimate services with lower consensus sales figures.
Apart from that, Alibaba said it has set up a local service company that houses the newly acquired online food supply company Ele.me and the local KUbei company for the service platform, separately with investments from Alibaba, Ant Financial and external investors.
The company said it has received $ 3 billion in new investment commitments from Alibaba and the Japan-based Softbank Group Corp. and will include a "material one-time revaluation capital gain" because it consolidates Koubei.
The share of Alibaba has dropped 10.4% in the past three months, as concerns about a trade war between the United States and China and a slowing Chinese economy weighed on Chinese equities and the renminbi.
For comparison: the iShares China Large-Cap exchange-traded fund
has decreased by 11.5% over the last three months, while the S & P 500 index
In a conference call with post-revenue analysts, Alibaba Executive Vice President Joseph Tsai tried to remove trade interests by stating that China has become less dependent on exports over the years, so that the Chinese economy can withstand the imposition of tariffs. Chinese products.
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Tsai said Alibaba is aimed at catching the Chinese domestic consumption opportunity, growing less dependent on exports. "We believe that Chinese government policy will continue to support China's imports to meet the growing demand from Chinese consumers," Tsai said, according to a FactSet transcript.
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