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Takeaway: Singles Day was a big success, but we can't glean too much for F3Q15. Mobile continues to surge, which will be a growing headwind for BABA

KEY POINTS

  • TOTAL GMV: As of midnight in China, BABA reported total transactions with a GMV (Gross Merchandise Value) of RMB 57.1B for the 24-hr Singles Day event, which translates to y/y growth of 57%.  If that growth holds through the quarter, it would mark a considerable acceleration in y/y GMV growth from the 51% growth reported last quarter (F2Q15).  However, we don’t know how much of F3Q15 GMV will be concentrated into Singles Day.  Jack Ma suggested on CNBC that there was a slowdown in GMV in anticipation of Singles Day, so we can’t glean too much for F3Q15 from the Single Day GMV report.
  • MOBILE GMV %: We want to reiterate that Mobile is a headwind to its marketing business since vendors aren't wiling to pay comparable ad rates for mobile ad clicks and BABA isn't delivering a comparable ad load on mobile devices.  BABA reported that 42.6% of GMV occurred on mobile devices, which would mark a 7 percentage-point acceleration from its prior quarter.  If that percentage holds for the quarter, it would be produce a y/y acceleration of 23 percentage points, which would be the largest y/y increase in Mobile GMV % in its reported history.  
  • THE BIGGER QUESTION: How much of BABA's GMV came from Tmall, which is where it collects commissions.  The ongoing shift in GMV towards Tmall remains its largest driver of Commission revenue growth.  The key question: What is the ultimate ceiling for Tmall GMV mix? This will be the key metric that we'll be monitoring moving forward,  because once the Tmall GMV % sputters, the runway for Commission revenue growth will sputter with it.  That would expose the growing weakness that we’re expecting for BABA’s core marketing segment (~60 of revenue).

For more detail on our bearish long-term thesis, see link below.  Let us know if you have any questions, or would like to discuss in more detail.

BABA: Leaning Short, But...

10/21/14 07:02 AM EDT

http://app.hedgeye.com/feed_items/38742

Hesham Shaaban, CFA

@HedgeyeInternet