Alibaba Shares Surge With Buyback, Signs of Covid Easing

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

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

Alibaba reported a surprise net loss for the quarter as it marked down investment holdings, but it offered investors support on other fronts. The company approved a $15 billion expansion to an existing $25 billion buyback program while 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 from the state authorities, that can be expected to have a positive impact. We certainly do note still some disruption to logistics in certain regions of the country,” Chief Executive Officer Daniel Zhang told analysts on a post-earnings conference call. “But overall we do 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) versus projections for a profit of almost the same amount, after it marked down the value of investments across a portfolio that includes Didi Global Inc. and Indonesia’s GoTo. Adjusted Ebitda did rise 24% for the quarter, a metric analysts at Jefferies highlighted as a sign of progress.

“We consider it is in a sweet spot to embrace the reopening story ahead, thanks to its huge and engaging user base with the pursuit of successful customer segmentation strategies coupled with wide product selections,” the analysts at Jefferies wrote.

Alibaba Seen as Recovery Story Despite Revenue Miss: Street Wrap

Revenue rose a slightly less-than-expected 3% to 207.2 billion yuan in the September quarter, after cloud sales — the company’s biggest growth driver in recent times — notched its slowest-ever pace.

Still, investors point to signs Xi Jinping’s administration is retreating from its Covid Zero framework and growing supportive of tech firms. While it’s early, there are steps that suggest a renewed focus on unshackling the private sector and reviving the world’s No. 2 economy.

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

Analysts at Bernstein including Robin Zhu summoned up Shakespeare to capture the drama of Beijing’s Covid policies. “All the world’s a reopening play?” they wondered in a report after Alibaba’s earnings.

“All the China ADRs are a reopening play, all the local governments merely players; they have their exits and their entrances; and one man in his time plays many parts…,” they wrote.