Alibaba also faces a hit to revenues as it supports the community with breaks such as cheaper loans. Fee waivers will mean about a US$430 million ($668.1m) revenue loss in the first half, estimates Citigroup. Together with subsidies, those account for less than 2 per cent of revenues. For now, all that is manageable.
The risk of an extended outbreak is the bigger threat. Consumer spending, which Alibaba relies heavily on with almost 90 per cent of sales coming from ecommerce, is expected to grow just over 1 per cent in the first quarter, Oxford Economics estimates.
Prolonged business closures and unemployment would discourage big ticket purchases. It would also weaken demand for luxury items, fashion and electronics, which account for a large chunk of fees. Shares trading at 30 times forward earnings, near three-year highs, have not fully priced in those risks.
Yet, as with all outbreaks, the impact will be temporary. Healthy operating margins of more than 23 per cent and free cash flow of more than US$17 billion still put Alibaba at the top of the list for shoppers in the Chinese equity market.
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