Yahoo earnings offer peek into Alibaba’s cave of treasure

A slow buzz has been building around Alibaba, the Chinese e-commerce giant that is expected to debut on the American stock market in the next few weeks and whose valuation could be above $150 billion.

Many Americans have likely never heard of the online retailer, but it dominates China’s e-commerce market and is expected to be one of the largest initial public offerings by a tech company. Though comparisons are often drawn with Amazon, the company doesn’t sell products directly to consumers. Instead, it sells them at wholesale prices to small business owners and mom-and-pop retailers in China.

Yahoo’s latest earnings report offered a rare peek into Alibaba’s cave of treasure. The tech giant owns a 24 percent stake in Alibaba. Here’s what we know about the retailer, based on Tuesday’s report and Alibaba’s own actions:

Alibaba had a roaring fourth quarter

The company’s revenue was up 66 percent from the previous year to $3.06 billion , and its net income jumped a whopping 110 percent to $1.4 billion, according to the report. That’s higher than Amazon and eBay’s combined net income in the last quarter.

The large jump comes in part from a Chinese holiday known as ‘Singles’ Day,’ celebrated on Nov. 11, which is one of the country’ s biggest online shopping days. Last year, Chinese shoppers bought $5.7 billion worth of goods on Singles’ Day using Alibaba’s payment service Alipay.com, the company said. To put that in perspective, Americans spent about $2.3 billion on Cyber Monday last year, according to Adobe Digital Index.

Alibaba is acquiring, and fast 

Its pending IPO aside, the retailer has been in the news for a purchasing spree. Alibaba invested in a host of businesses over the last few months, including AutoNavi, an online navigation company, Intime Retail, a Chinese department store operator, and Tango, a messaging app. The company has also partnered with newspapers across China to draw customers onto Taobao, its online shopping mall business.

Alibaba’s affiliates are having IPOs of their own 

Weibo, the Chinese microblogging service similar to Twitter, debuts on Nasdaq Thursday. Alibaba owns a 19 percent stake in the company. Unlike its owner’s astronomical valuation, however, Weibo has struggled to generate the same kind of excitement. The company is seeking to raise $4 billion, which is about 20 times its sales. In contrast, Twitter’s debut raised about 40 times its sales.

Alibaba’s numbers benefit Yahoo and Softbank 

Yahoo’s shares experienced a surge in morning trading, based on its positive earnings report, but primarily because of Alibaba’s strong showing. The company’s shares were up nearly 6 percent at 11:11 a.m.

As the Post’s Hayley Tsukayama writes:

For several quarters now, Alibaba’s growth has been off-setting stagnation in Yahoo’s core business, and information about the Chinese firm has been nearly as important to investors as Yahoo’s profits.

“Even though Yahoo’s a big company, [the Alibaba IPO] will have a huge impact,” said Larry Levine, a valuation expert and managing director for McGladrey LLP’s financial advisory practice. “It’s in Yahoo’s best interest to provide more information relative to Alibaba, because it makes it easier to evaluate their own interest” in the company.

Japanese telecom provider Softbank, which owns a 37 percent share in Alibaba, also enjoyed a strong day on the Asian markets. The company’s shares soared more than 8 percent after Yahoo’s earnings report came out.

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Amrita Jayakumar covers federal government contracting for Capital Business, The Post's local business publication.
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