On May 7, 2015, Alibaba GroupHolding Limited (NYSE/BABA) released its quarterly earnings report for the year ended March 31, 2015. The company also named a new CEO, Daniel Zhang, who currently holds the title of COO (Chief Operating Officer). In response to the news, Alibaba’s stock price opened 11% higher at $88.83 per share this morning.
According to Alibaba’s report, revenue increased 45% in the fourth quarter to $2.81 billion. Earnings, however, fell 49% to $463 million. The fall in earnings was mainly due to employee stock awards. Excluding the share-based compensation expense, earnings-per-share (EPS) actually increased seven percent to $0.48 a share, beating analysts’ estimate of $0.43 a share. (Source: Alibaba Group, May 7, 2015.)
Jonathan Lu, current CEO of Alibaba Group, commented, “Alibaba had a strong quarter with significant growth across our key operating metrics.” Gross merchandise volume in China retail marketplaces increased 40% year-on-year to $97.0 billion. Annual active buyers are now at 350 million, a 37% increase compared to last year.
Investing in the Future
Alibaba is also expanding its business and making strategic investments in a wide range of fields. These include entertainment, mobile Internet, travel, and health care. With numerous strategic mergers and acquisitions over the years, Alibaba is trying to build a business ecosystem that would facilitate global economic growth.
Alibaba Replacing its CEO
Eight months after the company’s initial public offering (IPO) in September 2014, Alibaba Group is replacing its CEO. Daniel Zhang, the current COO, will replace Jonathan Lu as the CEO, effective May 10, 2015. Lu will work with Zhang to “ensure a successful transition in the coming months.” Moreover, Lu will serve as a vice chairman on the board of directors of Alibaba Group.
The company’s reason for the change of CEO is to train and develop the next generation of leaders. However, the disappointing performance of the company’s stock price is very likely another reason.
Alibaba Group’s share price has lost more than 28% since November of last year. That is a $70.0-billion loss in market value. Indeed, it’s about time for a change.
With a solid financial report and growing business prospects, it seems Alibaba is on its way to further success. The stock market, however, has yet to agree with that. Despite today’s pre-market jump, the stock has to climb more than seven percent just to get to its initial IPO price and 40% to get back to its $117.00 high of last November.