Updated from 9:48 a.m. to include thoughts from BMO Capital Markets analyst in the eleventh paragraph.
NEW YORK (TheStreet) –– Alibaba (BABA) shares rose after the Chinese Internet conglomerate posted revenue that was better than expected in its first ever quarterly earnings report since becoming a public company.
Beijing-based Alibaba reported earnings of 45 cents a shares on $2.74 billion in revenue, up 54% year over year led by a surge in mobile sales. The company, which is approximately 15% owned by Yahoo! (YHOO) , said gross merchandise volume (GMV), a closely watched metric, rose 49% year over year while annual active buyers jumped 52%.
Watch the video below for a closer look at Alibaba's quarterly results:
Analysts surveyed by Thomson Reuters were expecting earnings of 45 cents a share on revenue of $2.61 billion.
"We delivered a strong quarter with significant growth across our key operating metrics," said CEO Jonathan Lu in the press release. "Our business continues to perform well, and our results reflect both the strength of our ecosystem and the strong foundation we have for sustainable growth. On our China retail marketplaces, gross merchandise volume for the quarter increased 49% and annual active buyers increased 52% year on year. We extended our unrivaled leadership in mobile with 217 million monthly active users on our mobile commerce apps in September and US$95 billion in mobile GMV for the twelve months ended September 2014. We are also encouraged by continued improvement of mobile monetization which demonstrates the strong commercial intent of our users."
Following the earnings report, shares rose 2.5% in early trading to $104.29, following a sharp run-up in Monday's trading session.
Here are the three biggest takeaways from Alibaba's first earnings report:
Mobile: Mobile revenue was $606 million during the quarter, up an astounding 1,020.2% year over year, as the company added 29 million mobile monthly active users (MAUs) during the quarter, bringing its total to 217 million. Perhaps most importantly, mobile GMV now accounts for 38.5% of all sales for Alibaba, making Alibaba a mobile-centric company into 2015 and beyond.
Alibaba's mobile monetization rate, the amount of revenue it generates per mobile transaction, rose to 1.87% in the September quarter from 1.49% in the June quarter, showing just how strong Alibaba is becoming on mobile. The 1.87% take rate is below the 2.54% rate on desktop, but the spread is rapidly closing.
Barclays Capital analyst Alicia Yap noted that the strength in Tmall and Taobao GMV's exceeded her expectation, and perhaps most important was the strength in mobile. "More importantly, mobile GMV increased to 35.8% of total and mobile revenue improved to 22% of total revenue, up from 15.6% last quarter and 3% a year ago," Yap wrote in an analyst note.
GMV accelerating: For a company as large as Alibaba, for gross merchandise volume to accelerate is no small feat. GMV during the quarter was $90.53 billion, up 49% year over year. Much of that strength came from Tmall, which saw GMVs rise 78% year over year, while Taobao only rose 38% year over year. In an earnings preview note, Goldman Sachs said since Alibaba has more ways to monetize Tmall than Taobao, that could benefit the stock even further.
BMO Capital Markets analyst Edward Williams, who rates shares "outperform" with a $110 price target, believes the GMV acceleration, going to 49% in the Sept. quarter, up from 45% in the June quarter and 46% in the March quarter, signifies the continued strength of the company's dominance in China."
Stock based compensation: Though Alibaba has proven it can make money in e-commerce now while Amazon (AMZN) portends it can do so in the long-term, the companies are fairly similar with both having heavy expenditures for stock-based compensation (SBC). In the quarter, Alibaba said SBC rose 248.4% year over year to $490 million, accounting for 17.9% of revenue. While much of that is likely due to the company's $25 billion initial public offering in September, it will be worth keeping an eye on in the future.
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