The jewel in the Chinese crown is losing steam by leaps and bounds and its shares on the stock market are trading at 2017 levels. The worst thing is that the company’s prospects are not at all favorable and everything indicates that it will continue to lose steam in the next fiscal year that begins April 1.
Downward results
The company has just reported results and immediately its shares have plummeted to very worrying levels, piercing the portfolios of millions of shareholders. In summary, Alibaba’s main problem is that its fundamentals are deteriorating at a very worrying rate. Thus, for example, the first quarter grew by 44%, the second fiscal quarter grew by 30% and from then on the alarms begin to go off. The company has explained in its analyst conference that it will grow below 23%, also coinciding with the quarter with the highest commercial activity that includes Singles Day, Black Friday and of course Christmas where supposedly the highest peak of sales occurs. year-round sales.
Despite the fact that it is a company that is growing, a deterioration in its numbers is clearly observed and that translates into a stock market crash of more than 50% in the last twelve months. Their published earnings per share shows a 35% drop compared to last year. The directors of the company had given an estimate of the drop in the result that all analysts thought was prudent, however, this data that should have been more positive and is well below last year.
According to analysts, the reported data casts doubt on whether the company continues to grow at a reasonable speed and it is also seen that they are burning more cash to support their salespeople. The bad news does not end here, while Aliexpress loses steam, its competitors increasingly have a stronger position. It is enough to compare the performance of the shares of its Chinese rival to realize the scale of the problem.
Not everything is the price or the gifts
The complicated situation of Alibaba is also aggravated because the Chinese government does not want there to be monopolies and it is precisely Jack Ma’s company that has had to face various problems. From millionaire penalties for abuse of a dominant position to the obligation to change suppliers so as not to benefit the same companies. In any case, the performance of your fundamentals is closely related to your business and marketing strategy. Sources consulted in Spain acknowledge that the company has no qualms when planning its advertising campaigns and invest excessively without a clear strategy. “Everything seems imposed from China and the way of communicating in Europe should be different.” While in China consumers value giveaways and gifts when participating in certain campaigns, Europeans prefer aggressive offers on high-quality products and especially excellent customer service, something that Aliexpress cannot boast of. A complicated situation that has no signs of improving in the short term and that will also benefit its competitors who do not stop growing. Companies such as Amazon, JD, Sea Limited or MercadoLibre are rubbing their hands with the decline of the Chinese giant.