Alibaba shares rise on buyback, signs of Covid easing

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

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Shares rose as much as 6.4% in Hong Kong trading on Friday morning.

Alibaba reported a surprise net loss for the quarter as it reduced investment holdings but offered investors support on other fronts. The company approved a $15 billion extension to an existing $25 billion buyback program, while extending the duration to 2025. Executives also expressed optimism about the eventual lifting of pandemic-related restrictions.

“With the introduction of the 20-point pandemic measures by the state authorities, this can be expected to have a positive effect. We’re certainly still seeing some disruption in logistics in certain regions of the country,” Chief Executive Officer Daniel Zhang told analysts on a conference call after the earnings reports. “But overall, we expect things to continue to improve in a positive direction.”

The Chinese e-commerce leader reported a net loss of 20.6 billion yuan ($2.9 billion), compared with forecasts for a profit of almost the same amount, after it cut the value of investments in a portfolio that included Didi Global Inc. and Indonesia’s GoTo. Adjusted Ebitda did rise 24% for the quarter, a metric analyst at Jefferies highlighted as a sign of progress.

“We believe it is well-positioned to embrace the upcoming reopening story thanks to its large and engaged consumer base with the pursuit of successful customer segmentation strategies coupled with a broad product selection,” Jefferies analysts wrote.

Alibaba seen as recovery story despite earnings Miss: Street Wrap

Revenue rose a slightly less than expected 3 percent to 207.2 billion yuan in the September quarter after cloud sales — the company’s biggest growth driver of late — hit their slowest pace on record.

Still, investors are pointing to signs that the Xi Jinping administration is backing away from its Covid Zero framework and growing support for tech firms. Although it is early days, there are steps that suggest a renewed focus on unleashing the private sector and reviving the world’s No. 2 economy.

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

Analysts at Bernstein, including Robin Zhu, invoked Shakespeare to capture the drama of Beijing’s anti-Covid policies. “Is the whole world a reopening play?” they wondered in a report after Alibaba’s earnings.

“All ADRs in China are a reopening game, all local governments are just players; they have their exits and their entrances; and one man plays many roles in his time…” they write.

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