But despite a parade of impressive headline numbers, investors may find themselves struggling to see how real its earnings are.
The company’s financial statements were released as part of its United States initial public offering, which is expected to take place in the coming months. The big numbers Alibaba has put up will probably excite many on Wall Street. The company says, for instance, that goods worth $248 billion were sold on its marketplaces in 2013, an amount more than that of Amazon and eBay combined. And Alibaba’s revenue grew 57 percent in the first nine months of its 2013 fiscal year. That pace is faster than at Facebook, currently one of America’s most successful technology companies.
Perhaps more important, Alibaba’s profit margins - which measure how much money the company gets to keep after paying its costs - will generate envy across Silicon Valley. The strong figures are encouraging some stock analysts to value the company north of $200 billion, which would be higher than IBM’s current stock market capitalization.
To put their own price on Alibaba, investors will most likely try to compare it against other technology companies. That may be difficult. While Alibaba shares characteristics of some well-known tech names, it is, over all, quite unlike any of them.
Like Amazon, Alibaba dominates its home e-commerce market. But, unlike Amazon, it does not amass large amounts of inventory. Instead, like eBay, it merely matches buyers and sellers. In some ways, though, Alibaba resembles Google. Alibaba gets a very large share of its revenue from sellers who pay for more prominent placement on the marketplaces. That income stream is akin to Google’s ad revenue. But the company did not say exactly how much revenue came from that source.
Alibaba is growing faster than eBay, Facebook and Google. Its revenue surged 57 percent in the first nine months of its 2013 fiscal year.
Compared with those American companies, Alibaba has far less revenue. But what excites investors is how much profit it earns. Alibaba’s operating profits in those first nine months totaled $3.1 billion, which was equivalent to 48 percent of revenue - a margin that is far higher than at Google, eBay and Amazon. Its operating margins are also better than those at other public Chinese Internet firms, including Baidu, a search engine, and Tencent, which is pre-eminent in messaging and gaming.
“In the last year or so, they seem to have pulled ahead of Tencent and Baidu,” said Brendan Ahern of KraneShares, which manages an exchange-traded fund that focuses on Chinese Internet stocks.
Still, investors seeking to fully understand Alibaba may feel shortchanged by Tuesday’s filing.
For one, the company did not provide crucial numbers that would allow outsiders to better gauge the performance of the two online marketplaces that generate nearly all of its revenue.
Some investors crave such numbers because they want to see whether Alibaba’s stellar profits growth can continue. Recent history shows that even the most successful Internet companies can be tripped up by abrupt shifts in consumer tastes and changes in technology.
“People want to know what the breakdown is across the various units,” Mr. Ahern said. “Hopefully, as we get closer to the I.P.O., we might see some unbundling.”
Alibaba makes most of its money from two major websites that dominate e-commerce in China. Taobao is a hectic-looking online bazaar where consumers can buy almost anything, from fresh groceries to building supplies to pets to concert tickets. The other is Tmall, a more streamlined marketplace where well-known brands are sold.
(Published by The New York Times – May 6, 2014)