Why Alibaba Stock Is Skyrocketing Today
Shares of Alibaba Group surged 10.4% following better-than-expected financial results for the December quarter, reporting net income of $6.72 billion and revenue of $38.46 billion. Growth was driven by the Cloud Intelligence Unit and International Digital Commerce Group, with year-over-year increases of 13% and 32%, respectively. Despite past challenges, Alibaba's stock is trading at a forward P/E of 13, significantly lower than Amazon's 34.5, making it an attractive option for diversified portfolios.
Shares of Alibaba Group (BABA 8.62%) are flying higher on Thursday. The company's stock gained 10.4% as of 10:24 a.m. ET. The gain comes as the S&P 500 (^GSPC -0.89%) lost 0.8% and the Nasdaq Composite (^IXIC -0.94%) lost 1.1%.
Growth in critical areas
Chinese tech firm and online retail giant Alibaba posted better-than-expected numbers for its December quarter. The company reported net income of $6.72 billion, up year over year from $1.98 billion and topping analyst estimates of $5.56 billion. Revenue for the quarter was $38.46 billion, beating estimates of $38.35 billion.
The stellar quarter was driven by success in two key areas, the rapidly growing Cloud Intelligence Unit and its International Digital Commerce Group. Driven by artificial intelligence (AI) demand, the former saw 13% year-over-year growth, while the latter grew 32% year over year, driven by strong international e-commerce demand.
The company's bread and butter, its domestic e-commerce business, grew 5% year over year, allaying fears that consumer spending inside China would shrink as the country faces economic troubles.
Alibaba looks to the future
Trading around $137, the company's stock is well off its 2020 high of $306.16. After years of major sales growth, the company has struggled in the past few years after it faced antitrust actions from Chinese regulators and stiffening competition. However, things are looking better as of late, as the company has stabilized its e-commerce sales and accelerated into the age of AI.
With a forward price-to-earnings ratio (P/E) of just 13, Alibaba trades at a steep discount from its U.S. counterparts -- Amazon, its most direct American analog, has a forward P/E of 34.5. Alibaba would make a solid addition to a well-diversified portfolio.