Alibaba shares rise on acquisition, signs of easing of Covid

(Bloomberg) — Shares of Alibaba Group Holding Ltd. rose after the Chinese e-commerce giant unveiled a new buyback plan and suggested that Covid-19 restrictions are beginning to ease enough to benefit its business.

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The stock rose as much as 6.4% in Hong Kong trading on Friday morning.

Alibaba reported a surprise net loss for the quarter as it downgraded investments but offered investors support on other fronts. The company approved a $15 billion extension to an existing $25 billion repurchase program, while also extending the duration to 2025. Executives also expressed optimism about the eventual lifting of pandemic restrictions.

“With the introduction of the 20-point pandemic measures by the state authorities, this is expected to have a positive impact. We are definitely still experiencing some logistics disruption in some areas of the country,” CEO Daniel Zhang told analysts on a post-earnings conference call. “But overall we expect things to continue to improve in a positive direction.”

China’s e-commerce leader reported a net loss of 20.6 billion yuan ($2.9 billion) against forecasts for a profit of nearly the same amount, after it cut the value of investments in a portfolio that includes Didi Global Inc. and Indonesia’s GoTo. Adjusted Ebitda did rise 24% for the quarter, a metric that Jefferies analysts pointed to as a sign of progress.

“We believe it is well-placed to embrace the reopening story, thanks to its huge and attractive user base with the pursuit of successful customer segmentation strategies combined with a large product selection,” Jefferies analysts wrote.

Alibaba Seen as Recovery Story Despite Revenue Miss: Street Wrap

Revenue rose a slightly less than expected 3 percent to 207.2 billion yuan in the September quarter after cloud sales — the company’s biggest growth driver in recent years — hit their slowest pace.

But investors are pointing to signs that Xi Jinping’s administration is pulling back from the Covid Zero framework and increasingly supporting tech companies. While it’s early, there are steps that suggest a renewed focus on unleashing the private sector and revitalizing the world’s No. 2 economy.

“We believe that Covid will eventually pass, that our society, economy and lives will eventually return to normal, and that China’s enormous potential as the world’s second largest economy will be further unleashed,” Zhang said.

Analysts at Bernstein, including Robin Zhu, invoked Shakespeare to capture the drama of Beijing’s Covid policies. “Is the whole world a reopening game?” they wondered in a report after Alibaba’s earnings.

“All of China’s ADRs are a reopening game, all local governments are just players. They have their exits and entrances. and a man in his time plays many roles…”, they wrote.

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