Alibaba Group Holding Ltd New CEO Faces A $97B Question

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Chinese e-commerce giant Alibaba released its fiscal fourth-quarter results on Thursday. Its revenue rose 45% to $2.8 billion with 48 cents a share in earnings, beating the Wall Street consensus on both metrics. Alibaba also announced that Daniel Zhang will succeed Jonathan Lu as its new CEO, effective May 10th. Though Jonathan Lu will work with Zhang to ensure a smooth transition, the incoming CEO faces a big $97 billion question.

Alibaba has lost $97 billion of market cap in six months

Alibaba has lost $97 billion in market value since November 10, 2014 until Wednesday, May 6. The euphoria around its historic $25 billion IPO has come down. Despite losing almost $100 billion, Alibaba is still on par with Amazon in terms of market cap. It gets even more impressive considering that Amazon generates seven times more in annual sales, according to Dan Gallagher of The Wall Street Journal.

A few days ago, Alibaba founder Jack Ma warned that the company had grown “too quickly.” By naming a new CEO, Ma seems to have acknowledged that Alibaba is entering a new phase of high volatility and uncertainty as the Chinese economy continues to cool. Despite the government’s efforts to fuel growth, the world’s second-largest economy is growing at the lowest pace since 1990.

Investors still expect strong growth momentum for Alibaba, and its latest quarterly results were encouraging. Alibaba is looking for new avenues of growth. It is investing in everything from smartphone vendors to messaging apps to entertainment businesses. Alibaba is also expanding in India, Brazil and Russia to maintain the growth momentum.

Alibaba faces execution, operational risks

Alibaba’s new CEO faces operational, execution and regulatory risks as the company moves forward with its global ambitious plans. Zhang has been with the Hangzhou-based e-commerce behemoth for eight years, most recently as its chief operating officer. So, radical changes seem unlikely. Wall Street expects the company’s current fiscal year revenue to jump 36% with a 32% rise in operating profits. It indicates that expectations are still sky high.

Can Daniel Zhang help Alibaba regain its $97 billion market value, especially as a major lockup expiration in September is set to flood the market with additional shares?

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