Alibaba Group Holding Ltd (阿里巴巴) shares yesterday fell the most in 18 months and cut its market valuation by about US$30 billion after investments in brick-and-mortar assets and digital media squeezed profit margins in the quarter ended in December last year.
The Chinese e-commerce giant reported revenue that topped analyst estimates and raised its growth forecast for the 12 months ending next month to 55 percent to 56 percent.
However, operating margin shrank to 31 percent last quarter, compared with 39 percent a year earlier.
Shares fell 5.9 percent in New York trading, the sharpest decline since June 2016.
Alibaba is also to buy 33 percent of Ant Financial Services Group (螞蟻金服), helping to clear the way for an initial public offering of the Chinese payments giant. While no cash is changing hands, Ant Financial would end royalty payments to Alibaba that were worth more than US$300 million last fiscal year.
Ant Financial has had a string of recent setbacks, with its US expansion thwarted by the collapse of a deal for MoneyGram International Inc while its Chinese business faces greater scrutiny from regulators and increased competition from Tencent Holdings Ltd (騰訊).
Formally known as Zhejiang Ant Small & Micro Financial Services Group Co (浙江螞蟻小微金融服務集團), Ant Financial operates Alipay (支付寶), as well as money market funds and credit scoring. It is based in Hangzhou, China, the same hometown as Alibaba.
Once dominant in China, Alipay’s share of online payments in the country has slumped to 54 percent as of the end of September last year amid the rise of Tencent’s WeChat (微信) platform, research firm Analysys International said.
Alibaba chief financial officer Maggie Wu (武衛) said on a conference call that investors should not equate lower margins with lower profits, as the overall business is growing.
“We are making the pie much bigger; 60 percent of an apple compared with 40 percent of a watermelon, which one do you want?” she said.
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