Alibaba faces sceptical crowd ahead of results

When Alibaba publishes its quarterly earnings in New York today, the Chinese ecommerce group will face the clamour from a crowd of increasingly sceptical investors.

There is a palpable sense among analysts that Alibaba's honeymoon - which saw the ecommerce group break records with last year's $25bn New York listing - is over.

Since November, Alibaba's share price has fallen from more than $119 to $79 earlier this week - the first time its shares have dipped below $80 since its record-breaking initial public offering in September.

Analysts will be watching the earnings announcement for any evidence of sluggishness in revenue growth, which undershot expectations at Alibaba's previous results statement in January. They will also be looking for clarity on government attempts to regulate ecommerce and how this will affect the company's profits.

"There is a lot of concern about just how sustainable is the hype around Alibaba," said Shaun Rein, head of China Market Research Group, the Shanghai-based consultancy. "The share price went out of control after the IPO but all the hedge funds we were talking to said: 'We want to get in before anyone else does, and we want to get out before anyone else does.' "

Alibaba will be hoping that Thursday's earnings announcement receives a better reception than its previous one in January, which sent its stock down 10 per cent on weaker than expected revenues. But perhaps most of the damage was due to Alibaba's dispute with the State Administration for Industry and Commerce, a Chinese regulator.

In January SAIC said it had found evidence of bribery, fake listings and counterfeit goods on Taobao, Alibaba's most popular consumer marketplace.

The attention from regulators spooked some investors, said Chi Tsang, internet analyst covering Alibaba for HSBC in Hong Kong.

"Some think the government may yet force Alibaba to drop all these merchants that are selling fake goods, and if so, what is that going to do to sales on Taobao?" he asked.

Mark Natkin, director of Marbridge Consulting, the Beijing-based internet consultancy, said the SAIC row had "planted a coconut-sized seed of doubt in everyone's mind" about Alibaba's business model.

"The SAIC's report didn't tell anyone anything they didn't already know," he said. "The fact that there are a lot of fake products on Taobao has never really bothered anyone, but now that the government seems serious about regulation, people don't know what cleaning that up will mean for Alibaba's bottom line."

The lower than expected revenues in January, added Mr Tsang, partly reflected a switch to mobile by many users - a platform that generates smaller revenues because merchants are unwilling to pay as much for mobile advertising.

Mr Rein said another concern was that Alibaba was paying the price for its pre-IPO corporate shopping spree, and a hiring glut that raised staff headcount by nearly 50 per cent.

Jack Ma, Alibaba's chairman and founder, recently responded to accusations of bloat by declaring a hiring freeze along with other austerity measures, such as not paying workers a traditional spring festival bonus.

"They obviously pushed hard to get great numbers to have a super awesome IPO," said Mr Rein. "But it's hard to maintain that momentum. It might have been better to have slightly weaker IPO numbers, and then just kick butt in the coming quarters."

Cao Lei, director of the China Ecommerce Research Center in Alibaba's home city of Hangzhou, said the acquisition spree last year - in which the company made more than $6bn of new investments in the lead-up to its IPO - had been a failure. "The abundance of companies it acquired last year have not apparently contributed to its existing business," said Mr Cao.

"For the moment Alibaba does not have many tricks in the bag to impress the market," he said.

Alibaba, citing a pre-earnings quiet period, declined to comment.

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