Why Alibaba Stock Was Sliding Today

What happened

Shares of Alibaba (NYSE: BABA), the Chinese tech giant, were slipping today after it reported sluggish revenue growth in its March quarter earnings report. It also continued to make progress on its breakup plan, approving the spinoff of its cloud business.

As of 11:15 a.m. ET, the stock was down 3.8%.

Image source: Getty Images.

So what

Alibaba continued to struggle with a challenging consumer environment in China as the e-commerce sector matures and it faces competition from Pinduoduo parent PDD Holdings and TikTok owner ByteDance.

Revenue in the quarter grew just 2% to $30.3 billion, which essentially matched the analyst consensus at $30.2 billion.

Profitability significantly improved in the quarter with adjusted earnings before interest, taxes, and amortization (EBITA) up 60% to $3.7 billion due to an increase in the core China commerce business, as well as narrower losses in the local consumer services and digital media and entertainment businesses.

On the bottom line, it said adjusted earnings per share rose 35% to $1.56, which topped estimates at $1.35.

The board also approved a full spinoff of the Cloud Intelligence Group, which will happen through a stock dividend distribution on its way to becoming a separate listed company.

It’s also begun to start the process to raise external financing for international digital commerce business, and it’s working on an IPO for the Cainiao logistics business and Freshippo, its grocery business.

Now what

Alibaba doesn’t provide guidance, but the updates on the spinoff plan should reassure investors that there’s underlying value here, as that seems like the best move for the company going forward.

Still, the company has seen minimal growth for several quarters now, finishing the fiscal year with just 2% revenue growth.

Until top-line growth reaccelerates, the stock is likely to be stuck in neutral as investors wait for the breakup plan to play out.

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Jeremy Bowman has positions in Alibaba Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.