- BABA stock loses 8%, moving below $80.
- Revenue for the fiscal Q2 missed consensus by $230 million.
- Management has decided against spinning off the cloud business for now.
- Alibaba issued a $1 annual dividend to holders of ADS shares.
Alibaba (BABA) stock did not appreciate the Chinese e-commerce leader’s fiscal second-quarter earnings results early Thursday. BABA shares dipped 8% on Thursday after Alibaba missed the quarter’s sales consensus by $230 million. Management has also decided against spinning off its cloud business due to US semiconductor restrictions.
The cash-strong company still introduced a dividend for foreign investors, who have been disappointed by the failure of BABA stock to rebound from a 75% sell-off that began more than three years ago.
US stocks are beginning Thursday’s session at a loss following three straight days of optimism and even euphoria. Cisco (CSCO) and Palo Alto Networks (PANW) both traded lower in line with Alibaba as both technology stocks presented reduced guidance for the present quarter and the full year. Walmart (WMT) beat consensus on its quarter but warned of a slowdown in consumer spending beginning in the second half of October. This news rattled the stock market.
Alibaba Stock Earnings: Another earnings beat, another revenue miss
The good news was Alibaba’s top line – $2.14 per share, which was 5 cents better than Wall Street Consensus. Adjusted earnings for owners of American Depositary Shares (ADS) rose 21% from a year ago.
Revenue rose 8.5% from a year ago to $30.81 billion but missed the consensus for $31.04 billion. It has become a common phenomenon for Alibaba to beat consensus for earnings but miss consensus for sales, which have largely consolidated around the $30 billion mark over the past three years. Management said that revenue was somewhat reduced due to Alibaba focusing on higher-quality revenue streams and giving up on lower-margin, project-based revenue.
Management also introduced a $1 annual dividend for ADS shareholders, which will be paid on January 18, 2024 for shareholders of record on December 21. This gives Alibaba stock close to a 1% forward dividend yield.
The most prominent news from management’s quarterly release is that Alibaba will hold off on spinning off its cloud business following the Biden administration’s new export controls for advanced computing chips. Management felt that the cloud segment would not be able to achieve a worthwhile valuation in a spin-off due to concerns about the US’s new semiconductor policy.
Both its logistics segment, Cainiao, and its digital commerce segment are still in the process of raising external funding for a spin-off. During the fiscal second quarter, Alibaba spent $1.7 billion buying back 18.6 million ADSs.
Semiconductor stocks FAQs
A semiconductor is a term for various types of computer chips. Officially called semiconductor devices, these computer chips rely on semiconductor materials like silicon and gallium arsenide to process the electrical current that produces the modern world of computing. They come in many shapes, sizes, enhancements and configurations such as diodes, transistors and integrated circuits to more complicated applications like DRAM memory, simple processors and even GPUs.
First, there are the pure chip designers, such as Nvidia, AMD, Broadcom and Qualcomm. These companies use sophisticated software to design and test chips. Second, there are the equipment manufacturers that provide the machines necessary to build computer chips. These include ASML and Lam Research. Then, there are foundries that manufacture the chips. These include Taiwan Semiconductor and GlobalFoundries. Last of all are the integrated device manufacturers who design their own chips and additionally manufacture themselves. These include Samsung and Intel.
It is the observation that the number of transistors in an integrated circuit doubles every two years. The “law” is named after Gordon Moore, who founded Fairchild Semiconductor and later Intel. The doubling is possible due to the shrinking size of process nodes or parts in the computer chip. In 1971 the advanced commercial manufacturing had reached 10 microns in width. In 1987 semiconductor technology had advanced to 800 nanometers in width. By 1999, this process had moved to 180 nanometers. By 2007, the size had dropped to 32 nanometers, and this fell all the way to 3 nanometers in 2022, which is close to the size of human DNA.
In 2022, the global semiconductor industry had revenues just under $600 billion. In total, the industry shipped 1.15 trillion semiconductor units in 2021. The leading nations involved in the semiconductor supply chain are Taiwan, the United States, China, the Netherlands, South Korea, Japan and Israel.
Alibaba stock forecast: BABA descends just above support at $78
Alibaba stock has formed a Doji candle just below the $80 handle an hour into the Thursday session. This is not too far above the $78 support structure that held up in both May 2022 and May 2023. If it fails to hold, that could send BABA stock back to the $58 and $64 support band that held up a major sell-off in October 2022.
To regain interest from bulls, BABA needs to overtake the $82 support level and then upend resistance in the vicinity at and above $88.
BABA daily stock chart