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hey welcome back to two guys TR so I'm Dylan and I'm Vinnie and holy crap it was a great wild week for Alibaba shareholders like ourselves we got some news about Alibaba themselves and Michael bur the super investor bought some more Alibaba stock we're talk about this earnings report because I think it's a really pivotal one we're seeing a dramatic shift and it's gonna really determine whether or not I want to remain an Alibaba shareholder for a long period of time or my time Horizon shortning we're going to take a look at everything they talked about though all right so um you know this is the Fivay chart for Ali Baba shares all right we had a nice pop on Friday but that's not when earnings were reported earnings were actually reported before the Bell here on Thursday where we got this wild speculation before Market opening uh you know initial numbers not so great Market sold off you know earnings call had some positive things we'll talk about towards the end of the video and then kind of sold off the rest of the day and we got a Chinese macro news that was good on Friday I didn't notice that I wish I would have been day trading that that a beautiful double bottom same point yeah see that yeah I like it um I mean the trend Trends we can look at if you want to bring up the chart itself it's in an interesting place it's in a territory it hasn't been a little bit get that um but Michael bur we got a 13 F filing this week you know he's been a Alibaba shareholder for for a while now kind of traded in and out um but he increased his position it's actually now like over 20% of his public portfolio is just an Alibaba stock alone increasing his Holdings 24% in the last you know 13 after filing which was for the last quarter now management highlights all right so this this is their sales piece this is like you know why do you want to be an alibab shareholder this is slide number one all right so if far as you know major metrics here they have their Tabo te all right they're basic consumer Brands um High single digit growth online gmv and double digit order growth all right so they were able to gain back some kind of customer loyalty and get people coming back a little bit you know they talked a little bit on conference call about stabilizing their market share right so signs are are you know starting to kind of turn around and they look like they're stabilizing where they are you know remember at one point they had like 60% of the market now they're down to like 40% uh you know rise up Tik Tock really unfortunately ate into their lunch quite a bit and as well as you know other Chinese competitors um so but it looks like they are hoping to stabilize around this level and they actually were finally able to see a little bit of positive momentum in some of their businesses no now another major point from the Alibaba Cloud 6% growth right now this was it's anemic compared to other Western Cloud providers where you're talking about 20 30% growth um but compared to their recent quarters they were seeing 1% 2% it's nice to see them finally move into the mid single digits this is also a major talking point we're going to mention when we talk about the earnings call and Alibaba International very very solid growth you know that they are growing significantly in other markets across the world and I think that's going to be a future growth driver for Alibaba but you know it's something keep an eye on but not there yet growth is still not great comparatively to other companies yeah yeah Google and Azure talking like 20% plus um yeah it's really a nemic compared to the Western companies um but like I said it's much better than the one two% growth per quarter that they were you know demonstrating before um and they do still highlight their positive net cash position of 55.8 billion dollar which is nice sexy problem to have about how to deploy that cash and then SL number two it goes right into like the the meat of what it is to be an Alibaba shareholder with a net reduction in outstanding shares in the last quarter of 2.3% right and they still have 26 billion dollar share purchase reauthorized through 2027 now if you look at their current Pace they could easily chew through that in the next like five quarters um but who knows what their their pce is going to remain into the future I want to really highlight this this is the amount of like cash I've been using per quarter in US dollars for Sher purchases right so for a while it was hovering this2 to three billion dollar per quarter range which was good but not fantastic when you're talking about a$2 200 billion doll company now all of a sudden look at the last two quarters 4.8 billion 5.8 billion big sexy numbers in terms of shevy purchases particularly when you look at how you know cheap alib babish stock is and compared to historically we'll get into my own kind of analysis as far as pricewise you know a little later on as well uh but they've been making some good inroads here in terms of reducing the share count they also mentioned that going forward that they're going to be prioritizing cash kind of long-term retention bonuses rather than uh employees stock you know kind of payments which is good they they're going to decrease the pace of you're going to see of dilution coming from employee share offerings they actually spent more in the last two quarters than in the previous four before that that's a lot that's a yeah they could they could blow through that 26 billion and five quarters at that rate that'd be pretty crazy yeah I mean I would absolutely love to see that especially if the share prices remain you know kind of depressed like they are now um this is where like people are just like what the hell happened to this company look at all these negative numbers all right this is just like complete under trash when you look on a year-over-year basis where you have so many things decreasing you know the the income from operations down 15% um and then other ones net income down 27% net income for ordinary shareholders down 29% uh non Gap net income 9% uh then you know ordinary shareholder down uh 10% here just a absolute like blood bath um of year-over-year comparisons in terms of decreasing profits and delivering you know income from their regular operations for shareholders just horrible like there's no other way of saying that it's just not good all right we're gonna get into a little more about why those sort of things here in a minute okay I was gonna ask why because that's depressing so this is another one that came out and was kind of like a not a great number was they're they're actually free cash flow which is the one that I like to watch the most here so 2.4 billion the most recent quarter now they don't give you their cops in US dollars but look at it here at miii uh we're talking about 39 billion to 17 billion right it's a 50% drop in free cash flow okay yeah but the real question is why all right capex look at this so 6.9 billion this is once again remov be to 12 billion all right they've almost doubled their capex right that's like huh okay so we're we're spending a lot more and we're not really growing on the top line very significantly why right we're gonna I want to sa that a little bit more for the for the conference call stuff because that's really where they get the meat of it and that's where why you saw that positive reaction after they finally explained what the hell they're doing uh this the last thing I wanted to talk about the side was 55 billion in that positive free uh cash all right cost controls all right so the actual cost Revenue mostly flat stable here nothing too crazy um they did have a little increase in sales and marketing all right so they are trying to spend a little bit more in sales marketing to get more consumers to come back to their platform and have more frequent purchases that's why they saw the double digit um growth in in orders and then the gmv was like high single digits um you know R&D they kept keeping mostly flat they did have an increase in general administrative they that was related to a class action lawsuit um so that that would have been basically flat if not for this but something else to keep an eye on make sure that they're not getting their cost out of control so all of those negative things happening about income and free cash flow and again when we look at like the the actual iida here we're like all right this is looks like garbage for the most part um you know just negative 1% for the tabout teamall group which is you know by far in away their their golden Gru uh not what you want to see um from a kind of shareholder perspective so these are definitely with some caution warning flags for me but like I said we're going to turn it around here um yeah this is very depressing yeah it it is it really is so you you see why the the the first reaction was very negative right that's why the stock was down 2% it's the it's the earnings call was G to give you some positivity um this this is on their presentation you can look at it yourself if you want there was nothing here that was like Earth shattering to me um so I'm not going to really spend any significant time on it um you know same thing with the cloud here they talk the 6% growth and uh nothing too crazy they do highlight some oh we carried a lot of the Olympic rodcast and like yeah okay but I care about money not not about uh these these little points all right so here's where we're gonna get to the meat of this whole thing right conference called notes there's a new technology fee that they're imposing on Merchants starting in September which will be 0.6% of gmv and it'll be refunded for small and medium Merchants if they don't meet a certain threshold all right so they're they're yeah they're they're basically increasing the tax a little bit on their their their um you know kind of platform or Merchants so that that right there should bring a significant amount of increased revenue for Alibaba right yeah I wonder what it is comparative to Amazon because Amazon takes a fairly large chunk like a surprisingly large chunk they did mention that in their conference call as well I don't they didn't say number but they they said that you know this is kind of the number that they settled upon looking at the market and looking at and talking to their customers um that thought was like a fair number uh they didn't go into details about how much revenue they expected to to bring on board they didn't talk about what the threshold is going to be for you know gmv size before they you know are not collecting it from their customers um this is really G to be more on their larger customers initially you know and but this is going to be that high margin kind of Revenue which we love right you remember they talked about how Tabo and t-all revenues split into two segments there's their direct sales which was down like 9% but their gmv that was up like 2% this is going to add more to that that that g uh CMV I'm sorry consumer uh management uh Revenue um this will add to that so it's that high margin business so that's good they're gonna have a new fees here starting like you know next month now Cloud capex all right they said that the size that we saw this quarter that we could expect to see for several several quarters right so that was kind of the doubled from last year and that's why free cash flow was down so significantly they are saying that it's going to be at this level of capex for several quarters all right but they are also saying because of that they're going to see Cloud growth in the double Dees by the second half of this fiscal year I've heard that before not in that short of a timeline though because second half of this fiscal year is now so that's that's a bold prediction well this was their first quarter so they have one more quarter before they get to that their calendar is off from yeah US economic quarter um but they they were asked a very good question about the ROI on capex on this cloud capex is it worth it all right he like any new Cloud capacity any server that they put online is instantly be being taken up yeah then why aren't they doing more ah okay that's great question they're working on it um they're working through a backlog of demand due to customers having significantly increased AI budgets for this year so they basically they're saying that every dollar of a capex they're putting on right now is instantly rewarding them this isn't like a a 10-year plan like uh you know building the metaverse like that they're saying that they're they're putting these servers online and they're immediately going into use and generating revenue for for alipo cloud turn turn on the money found on that then let's go let's turn it up yeah exactly so when you first hear like oh man their free cash flow is down 50% um and they're they're doubling their they've doubled their cap a you're like oh crap like what the hell are these guys doing uh but then you hear this and you're like oh oh okay I see it I would have done that and more right yeah so this is why you saw that that swing after the conference call that people were much more um satisfied not only are we G to get this additional you know kind of high margin Revenue coming from their old you know retail business but now you're seeing that their cack going into the cloud AI sector is instantly rewarding them so they they have two very positive things that came out of the earnings call I don't think the Sher purchases are going to be as high next quarter I mean you know it's a thought right because like theoretically they only had 2.3 billion in free cash flow so if they're spend another five billion you know that they're gonna be going you know reducing their cash balance by like 2.7 billion which they can do though because they still have 55 billion dollar in in positive like net cash and balance sheet they can continue to buy back shares and spend on capex at the same time now there's some Nuance to it because you know right Chinese law is a little bit restrictive about how they you know export cash where you saw that they had to do that kind of share offering and and raise some cash um externally in order to be able to continue to buy back shares but that's that's what you're going to see them trying to you know what's the word I want to say here uh feed two beasts a little bit where they're spending increasing C money on capex because they're getting good return on investment and they're going to be buying back shares okay now as far as this free cash flow yield calculation I always like to use uh the market cap uh as of Friday close was 2011 billion 55 .8 net positive free cash flow the trailing total free cash flow was down to 23.75 billion it has been on a downward Trend so that's something we really need to keep an eye on um but it still gives you a 16.3% free cash flow yield so a few thoughts here kind of closing as far as like what you know my thoughts are after hearing this is I I am at a kind of a pivot point where we've seen uh significant degradation in some of the underlying fundamentals from an earning perspective I want to see make sure that they are indeed going to manage this this 10% growth in Cloud over the next few quarters um I want to see that this this 0.6% fee does in start increasing the the CMR like a revenue in um tabout t-all and if those things are happening I'll continue to be an Alaba shareholder uh however if I continue to see degradation in the core business and those metrics aren't being met then it's like uh I'm at a point where maybe it's time to move on got to make a decision yeah yeah if they're spending all that extra money you're G to have something to show for it essentially um absolutely here's your chart it's I hate these because Boba trades like 18 hours a day so it's such a weird jumpy non-f flowy chart here's the this is the 200 and the 100 moving average just to show you how useless the death cross is where they say you uh you short when it happens this is the day it happened you would not have done well even though Bob's been on a massive downtrend wouldn't wouldn't have gone that well um you can see I mean we are jumping up super high I comparatively I don't know how much that means for Baba cuz it's such a weird thing they're traded I think only like four hours of rest so it's super super weird but I mean hey we're not in the 60s thank God might go back not sure it could be I mean like said the nice thing I think is we're finally going to get some answers over the next like two to three quarters about the overall direction Vol stock going into the future and then you can make your decision about whether or not you continue to hold it all right two to three quarters oh boy all right guys let's know what you think yep catch you next one
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