All in a week’s work. Beat the Street, make a buy. Alibaba did both, putting to rest fears of a Chinese consumer speed bump with its latest quarterly results, and, via Ant Financial, buying MoneyGram for a U.S. push. Now, if only malls in the U.S. could find some similar spark before they go dark.
SIZZLE
The Stock Market
Dow 20,000 is finally a reality. Pause for a minute and wonder what the markets may do for an encore. But it’s been a long strange trip since the depths of 2009. The markets in general are up more than 7 percent since the surprise election of Donald Trump as U.S. president — proving that, in equities, at least, it has paid off handsomely to be contrarian.
Ant Financial (U.S. Push Deepens In A Quick Fell Swoop)
The Chinese eCommerce giant is making quick work of its push to broaden product offerings and geography, too. The announcement Thursday (Jan. 26) that the firm would buy MoneyGram for a decent (though not spectacular) 12 percent premium shows further inroads into the United States. What will it do with this new asset?
eBay
Ebay beat the Street in its latest quarterly results and managed to see 3 percent gains on the top line based in part on holiday spending. Structured data initiatives are doing well. And this was in the wake of a report that a baker’s dozen Wall Street firms lifted price targets on the name.
FIZZLE
Bitcoin (More Scrutiny)
More scrutiny for the cryptocurrency, as speed trading is taking over, it seems, and the nation’s largest exchanges will begin charging a trading fee. The goal is to curb manipulation and volatility, but could traders back away whole cloth?
Malls
Lenders have been walking away from the properties, and loans are being liquidated — 11 percent more, in fact, in 2016 than had been seen the year earlier. The foot traffic is waning, and thus, so is investor enthusiasm. One mall, outside of Pittsburgh, just sold at auction for $100 after the owner defaulted on its $143 million loan.
McDonald’s (Foot Traffic Slides)
The tears of the clown, because there’s no one around. Foot traffic is also falling at the iconic fast food chain, just as McDonald’s is gearing up to boost technology and custom order options — and all-day breakfast failed to delight. Tough sell, maybe, as comp-store sales were down double digits in the fourth quarter and visits may have been down double-digit percentages.
Sizzle Of The Week: Jack Ma Winning Streak
Given his long history of rather exuberant public appearances, it seems fair to assume that most days are pretty good days to be Alibaba executive chairman Jack Ma. But as this week closes out, it seems it is probably a particularly good time to be Jack Ma. Coming off the big Olympic sponsorship deal announcement last week, Alibaba and Ant Financial both made big headlines this week — by outpacing analyst expectations for earnings and a big acquisition announcement, respectively.
Still, it seems for all the sizzling news, Ma is actually a bit less exuberant than normal — and actually predicting something of a coming economic fizzle.
But first, the good news…
Putting Fears To Rest
Despite fears of a coming hiccup in Chinese consumer spending, Alibaba saw some unexpected pick-up in its fiscal third-quarter results.
Revenues saw a 54 percent increase in the period to 53 billion yuan, compared to the 50 billion yuan that had been expected by analysts’ consensus (translating into $7.8 billon U.S. dollars [USD]). Net income stood at roughly $1 USD, or 9.09 yuan. Analyst predictions had clocked in at 7.70 yuan.
Guidance for 2017’s full-year also got a boost with revenue growth of as much as 54 percent set as the target, as opposed to the prior 48 percent.
eCommerce remains the engine right now for Alibaba’s growth. Core commerce saw 42 percent gains overall year over year. At the latest count, the firm had 493 million monthly active users, 80 percent of which access the marketplace via a mobile device. Total spend annually on a per-user basis, according to slides provided by the company, stood at about $35 at the end of December, up from roughly $26 a year ago at this time.
On the whole, a strong picture — particularly considering all that growth occurred while Chinese consumer spending was widely forecasted to contract. But it was still only the second most eye-catching news out of a Jack Ma-controlled business.
The winner was Ant Financial.
Ant Financial’s $880M MoneyGram Pick-Up
After early morning rumors started swirling that Ant Financial Services Group (which operates as an affiliate of Alibaba Group Holding) was considering acquiring MoneyGram — within hours the news was confirmed, and even had a price tag on it.
Ant Financial will pay $880 million to buy MoneyGram.
The deal gives Ant greater access to making inroads into the United States – a long goal of the firm, made more pressing by an IPO that Ant is reportedly looking to pursue before the end of 2017. The Wall Street Journal noted that Ant has a $60 billion valuation and had raised $4.5 billion in its most recent fundraising round. The inroads into the U.S.-based business are an extension of the position that Ant Financial’s Alipay maintains as China’s leading online payments conduit.
This is Ant’s second big U.S. acquisition of late — back in September, the firm bought EyeVerify, a mobile eye recognition tech firm that operates stateside.
As for MoneyGram, that firm is in partnership with about 350,000 locations across 200 nations via banks and retail outlets to allow for individual remittances within countries and across borders. In light of digitization and increasingly tough competition from WesternUnion, MoneyGram has reportedly been considering a sale since 2013.
The $13.25 a share that it shakes out to is about a 12 percent premium to MoneyGram’s trading price at the close of business on Wednesday (Jan. 24).
So, Alibaba earnings solid, Ant has gotten a massive foothold on U.S. soil. A clear sizzle.
But…
It is at least worth nothing that Jack Ma is a little less chipper than normal.
“In the coming three to five years … the economic situation will be even more arduous than everyone had expected,” said the e-commerce billionaire on Wednesday at an annual meeting of the General Association of Zhejiang Entrepreneurs, a private business association that he chairs.
He further noted that he while he thinks trade will absolutely go on with the U.S. even under a more protectionist presidential administration, the possibility for conflict is there.
“If the conflicts were not dealt with properly, they might lead to a relatively big trade war, which is not a good thing for China, the U.S. or the world economy,” he noted.
Still, he did note that he is on the whole optimistic about the trade situation with the U.S. — and that there is a mutually beneficial deal out there for all parties.
He is still Jack Ma, after all.
Until next week.