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Alibaba’s Audacious Goal To Reach $1 Trillion In Merchandise Sales

Alibaba ( BABA ) says it’s on a path to realizing its vision of achieving $1 trillion in gross merchandise volume in about four years, as it also pursues a goal of reaching 2 billion consumers on its e-commerce platforms. During the company’s conference call after posting its fiscal-fourth-quarter earnings on Thursday, company CEO Daniel Zhang cited reasons he’s optimistic of hitting the $1 trillion GMV goal. One big reason, he noted, is Alibaba’s successful transition from PCs to mobile devices. By comparison, e-commerce software firm ChannelAdvisor ( ECOM ) estimates Amazon.com ‘s ( AMZN ) GMV in 2015 at $225.6 billion, with 310 million users. At the time of Alibaba’s initial public offering in September 2014, mobile contributed less than 40% of GMV. Today, it’s 73%. Success also depends on international expansion and in continuing to transform its e-commerce business, along with continued investments and growth in its media and digital entertainment platforms, as well as its cloud computing business. Alibaba is one of the four largest Internet companies in China. The others are JD.com ( JD ), which runs a direct-to-consumer e-commerce site similar to Amazon ( AMZN ); China search-engine leader Baidu ( BIDU ); and Tencent Holdings ( TCEHY ), which dominates in gaming and mobile messaging. For all Zhang’s bravado, Alibaba is less than halfway toward its goal: For its fiscal year ended March 31, Alibaba had GMV of $485 billion, up 27%. And it said it had 423 million active buyers, up 21%. GMV is the total value of goods sold across Alibaba’s e-commerce platforms. Alibaba does not take part in direct sales, hold inventory or compete directly with its merchant base. Businesses and consumers use Alibaba’s e-commerce platform, and Alibaba takes about a 2.5% cut of GMV sales. It also makes money from advertising. Alibaba Counts On Growth For Tmall, Taobao Alibaba’s core e-commerce retail platforms are Taobao, Tmall and Juhuasuan. Together, they have 367 million active buyers, with about 90% of Alibaba’s revenue generated in China. Getting to $1 trillion will depend on the growth and expansion mainly of Tmall and Taobao. Tmall is China’s largest business-to-consumer website. Taobao is a consumer-to-consumer e-commerce website similar to eBay ( EBAY ). Taobao is the larger of the two. In fiscal 2016, it hit GMV of $295 billion, up 18%. Tmall reached $190 billion, up 43%. Part of Alibaba’s GMV growth is pegged to global expansion. Alibaba last month announced it acquired a controlling stake in Singapore-based Lazada, a leading e-commerce platform in Southeast Asia, for $1 billion. Lazada operates online retail platforms across Indonesia, Thailand, Philippines, Malaysia, Vietnam and Singapore, with GMV of $1 billion in 2015. “Our acquisition of a controlling stake in Lazada will allow access to 560 million consumers in one of the most promising markets for e-commerce,” said Chung Tsai, Alibaba executive vice chairman, in the earnings conference call. Alibaba in the March quarter showed its highest growth rate in a year, despite an economic slowdown in China. “In these challenging times for the global economy, Alibaba is bucking the trend,” said Tsai. He said Chinese households today have aggregate net cash reserves of more than $4.6 trillion. “This accumulated wealth and liquidity is the result of real double-digit wage growth over the past decade,” he said. Kerry Rice, an analyst at Needham, says Alibaba has a lot of room for growth ahead. “We expect the company’s core business to continue to be the engine of growth, and despite its scale and dominant market share, we believe it still has significant room for growth,” Rice wrote in a research report. Rice rates Alibaba stock a buy, with a price target of 95. Alibaba stock was up a fraction in afternoon trading in the stock market today , near 79.50. Alibaba stock is up nearly 30% since touching a seven-month low in early February. Alibaba’s stock has had a rocky trip since its blockbuster IPO raised $24 billion, the most ever. Shares priced at 68 and hit a peak of 120 in November 2014. RBC Capital Markets analyst Mark Mahaney has an outperform rating and price target of 105 on Alibaba stock, up from a previous target of 89. Based on its strength in mobile, “we believe this means Alibaba can sustain premium growth rates in its key retail segment for the foreseeable future,” Mahaney wrote in a research note.

Analysts Split On Square As Dorsey Remains Split Between Twitter

Loading the player… Payment processor Square ( SQ ) is crashing after its quarterly adjusted loss was wider than expected, reigniting questions about Jack Dorsey’s ability to lead two companies at the same time. Wedbush on Friday downgraded the stock to underperform and cut its price target to 9 from 11. The analyst projects that the company’s growth will decelerate over the next two years amid more competition and market saturation. Meanwhile, Goldman Sachs believes Square is still a buy despite the pullback, saying that “continued fundamental momentum should drive the stock to recovery as the company executes.” Shares are gapping down 20% in giant volume, hitting a more than two-month low. Square initially broke out of an IPO base in late March, and drifted in and out of buy range for a month before turning lower and breaching its 50-day line in Thursday’s session. Square is now more than 30% below its all-time high. Between this disappointing report and Twitter’s ( TWTR ) last week, CEO Jack Dorsey has his work cut out for him. Twitter is trading at all-time lows and is more than 60% below its 52-week peak, but edged up 0.7% Friday. Meanwhile, Square peer PayPal ( PYPL ) is retaking its 50-day line in quick trade, up 0.9% intraday. PayPal shares are trading 7% below its all-time high reached on its first day of trade after its split from eBay ( EBAY ). Elsewhere in the payment space, Visa ( V ) is trading around sell territory after an attempted breakout past a cup base failed. Visa was essentially flat by early afternoon. And MasterCard ( MA ) is trading just below buy range from a cup-with-handle base with a 96.21 buy point it initially broke out of less than a month ago. MasterCard was also little changed by the afternoon.

Obama Fostering Uncertainty Over Smartphone Encryption Issue

The contentious issue over whether the U.S. government should be able to force tech companies to weaken security on their smartphones and software apps so that law enforcement agencies can access private data isn’t likely to be resolved soon. But it could be. All it would take is for President Barack Obama to make a statement supporting strong encryption on tech devices and Internet services. Obama holds himself up as a tech-savvy president, but his lack of leadership on the encryption issue has prolonged the dispute between the federal government and tech firms, tech groups and privacy advocates say. “The White House should be leading on this issue,” said Cindy Cohn, executive director of the Electronic Frontier Foundation (EFF). “President Obama is trying to be the best tech president ever. He’s got really good technical consultants, and the idea that he wouldn’t listen to them is shocking.” The tech industry is united in its call to keep encryption strong, saying that weakening software security or creating back doors for authorities to bypass privacy protections opens the door for hackers and criminals. “The math doesn’t change,” Cohn said. “The math is the problem that the FBI has, which is: They cannot build a back door that only they can use. It doesn’t matter which technical expert you bring to bear on it. … This isn’t controversial in the tech community.” The FBI has sought court orders in two criminal cases to try to compel Apple ( AAPL ) to unlock password-protected iPhones. In both cases, the FBI ultimately backed down when it found other ways to access data on the devices. One involved paying a third party to hack the phone, and the other was resolved when the phone’s owner provided the password. Encryption Petition Quickly Surpasses 100,000 Signatures Last September, EFF, Access Now, and a coalition of nonprofit and industry groups launched a public petition calling on President Obama to defend strong encryption and oppose back doors. They used the We The People API, Obama’s preferred petition tool, and quickly surpassed 100,000 signatures. Despite the White House’s pledge to respond to petitions with 100,000 signatures within 60 days, it has remained quiet and is now four months overdue in its response. But if Obama doesn’t support strong encryption for businesses and consumers, perhaps the next president will. On Wednesday, 13 U.S. tech industry groups representing companies such as Apple, Amazon.com ( AMZN ), Facebook ( FB ) and Uber Technologies urged the two presumptive major party presidential nominees to support strong commercial encryption. The encryption stance is among a list of tech industry requests made in an open letter to Democrat Hillary Clinton and Republican Donald Trump. The trade groups asked the candidates to strengthen cybersecurity and encourage other governments to do the same. The letter urged the candidates to recognize the importance of encryption as a critical security tool and to advance policies that enhance data privacy. Groups signing the letter included the Consumer Technology Association, the Business Software Alliance, the Internet Association and the Semiconductor Industry Association. The encryption issue made headlines earlier this year when the FBI secured a federal court order to force Apple to unlock a smartphone belonging to deceased San Bernardino, Calif., shooter Syed Farook. Apple fought the order, saying it would set a dangerous precedent. To help educate the public, Apple CEO Tim Cook stepped up to become the face of consumer data security. He gave high-profile media interviews and made public statements about the importance of strong encryption. Apple’s fight to protect its encryption is about securing the data on all iPhones in use from bad guys, Cook said. That means securing customers’ data, including financial and health information, confidential business documents, private communications and photos. The FBI might have retreated in the cases of the San Bernardino terrorist and a Brooklyn drug dealer, but it is likely to pursue similar cases against tech companies in the future. Unless the White House tells it not to. Meanwhile, law enforcement supporters on Capitol Hill are crafting legislation that could force tech companies to comply with all law enforcement demands for customer data. Sens. Richard Burr, R-N.C., and Dianne Feinstein, D-Calif., have proposed the “Compliance With Court Orders Act of 2016.” As drafted, the legislation would require any individual or company to comply with any U.S. court order and hand over data to authorities, including data that is encrypted. The bill has been roundly criticized by civil liberties and digital privacy groups. No Encryption Bill Expected Until After Elections “I don’t think anything will happen in this session of Congress,” said Gary Shapiro, president of the the Consumer Technology Association. Political gridlock, especially during an election year, will ensure that no encryption bill is passed in Congress, he said. It is more likely that a court case will work its way up to the Supreme Court over the next couple of years, he said. Even if the FBI gets what it wants from the courts or Congress, the law would only be enforceable in the U.S. Foreign companies and their encrypted products would be unaffected, putting U.S. tech firms at a competitive disadvantage, Shapiro said. Public support for encryption is growing, especially in light of major data breaches at companies like Anthem ( ANTM ), eBay ( EBAY ), Home Depot ( HD ), JPMorgan Chase ( JPM ) and Target ( TGT ), as well as at government agencies, Cohn said. “We don’t live in a world where computer security is abstract and the damages and problems it causes for people are something that’s theoretical anymore,” Cohn said. “I think it strikes a lot of people as absurd that the government is engaging in trying to attack our security and undermine it and convince companies to give less of it when it should be their job to promote it.” Weakening security on mobile devices and software, says Shapiro, would destroy the confidence people have in businesses to keep their private data secure.