CGTN Europe interviewed Angelo Zino, Senior Vice President and Technology Equity Analyst at CFRA
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00:00Well, Chinese regulators have summoned the e-commerce giants to a meeting in Beijing to reiterate the need to observe competition and food safety laws, as well as their responsibilities to customers.
00:12Angelo Zeno is Senior Vice President and Technology Equity Analyst at the investment research firm CFRA.
00:20When we look at Alibaba, to your point, it grew 7% year over year. It was slightly below our expectations of about 8%.
00:27But, you know, you look at the numbers here over the last two years, it's a really good growth number for Alibaba specifically.
00:35And really what's driving the growth is two key areas of their businesses.
00:39One is their domestic Taobao and Tmall e-commerce platform.
00:44And then, of course, on the cloud side of things, that is doing extremely well.
00:49It's starting to see growth accelerate through about 18% year over year.
00:52But, you know, this is a company that has lost market share here in recent memory, in recent years.
00:59But you also have to think about the fact that the e-commerce platform or business within China continues to be a growing business.
01:06It is the free cash flow engine for Alibaba in general so that they can invest in other aspects of their business.
01:12So it is losing share.
01:15But the fact of the matter for Alibaba is it is still a growth driver for the company.
01:20And they are seeing some good operating efficiencies.
01:23I think there was just a very high bar kind of going into the quarter.
01:27And that's why they disappointed.
01:28Alibaba and JD.com are now both promising 30 to 60 minute delivery time windows in large parts of China, which is astonishing turnaround.
01:38In 10th competition, they, in fact, had to be reminded to keep the consumer in mind of all of this recently.
01:45Just talk to us about this particular aspect of the business.
01:48How important is this instant retail drive?
01:52And who is the winner?
01:54It's all about right now we think about two things, right?
01:57Or really one thing.
01:58And that is kind of getting more users on the platform and improving engagement levels.
02:03And at the end of the day, to get an increased level of users on your platform, the way you do it is, one, through more competitive pricing or, two, innovation through better services and what have you out there.
02:18So that's what Alibaba and others are trying to do here in the same respect as they are also trying to be very aggressive on the pricing side of things.
02:28Ultimately, we think that does improve engagement across the platform.
02:32It also gets new users on the platform.
02:35And that is ultimately what's going to drive growth, at least on that domestic e-commerce platform over time.
02:41Yeah, I'm seeing fascinating incentives to the consumer, giving them free milk teas and things like that, really innovating to push that ahead.
02:49If we look ahead to the next 12 to 18 months, where do you see Alibaba likely to put its energy?
02:57I mean, it has to be on the cloud side of things, right?
03:00When you look at this company, when you look at the opportunity for this company over the next, I'd say, three to five years, the biggest growth opportunity has to be on the cloud.
03:09It has to be tied to AI.
03:11When you think about the acceleration we're seeing on the cloud platform here, and you look at some of the massive CapEx investments that they've recently announced here over the last couple of months, it is going to be heavily driven on the cloud side.
03:24And when you specifically look at what we've seen here in the U.S. states over the last two years, you'd have to say, as far as China is concerned, there are early innings there as well.
03:38And when we kind of think about the opportunities there, the ability to kind of monetize that platform over the next couple of years, we think there's a massive opportunity for Alibaba.
03:48And they're going to be an early player, and they've got the scale out there to really kind of be a big player.