Warren Buffett On M&A, Elon Musk, Stock Pickers, Cryptocurrencies At Berkshire Meeting

Warren Buffett took questions from Berkshire Hathaway shareholders at the firm’s annual meeting Saturday. Here's a look at some of the things Buffett said.

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If a major company needs capital or a private firm wants to sell, Warren Buffett's checkbook is often the one they seek out. Will that stay the case when it's someone else's signature?

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That was the question from several Berkshire Hathaway (BRKB) shareholders at the firm's annual meeting Saturday, adding a fresh angle to the topic of succession for the 87-year-old chairman. Berkshire's desire to utilize a cash pile that has grown to more than $100 billion makes finding large-scale deals a key issue for whoever will be the conglomerate's next leader.

Buffett downplayed any unique skill he has to drum up deals, using his inability to find recent ones as evidence. Berkshire often makes large investments in times of panic, when its stable capital, and not the Buffett name, is the allure, he argued.

"The reputation belongs to Berkshire now," Buffett said at the meeting in Omaha, Nebraska. "We are the first call and will continue to be the first call."

Charlie Munger, Buffett's 94-year-old vice chairman, said already most acquisitions are coming from the chiefs of the company's operating subsidiaries, not he and Buffett.

"It's happening more there than it is at headquarters," he said.

Although Buffett named two vice chairs this year in a step toward succession, he didn't directly address the race for his heir at the meeting.

Overall, the meeting had a similar feel to recent years. Buffett and Munger traded one-liners and fielded a few tough questions. But, by and large, the two managed to charm their fans again and keep most of them in their seats for the entire six-hour session. Here were some other topics of interest.

Stock Pickers Combs, Weschler

Investors got some detail on the performance of the two men Buffett has handed some of his stock-picking duties. The billionaire said the deputies have both "slightly" beat the S&P 500 Index since they started managing Berkshire's money.

Todd Combs and Ted Weschler, who together oversee about $25 billion, have almost identical performance since they joined, Buffett said. Combs was hired by Berkshire in late 2010 and Weschler joined about a year later. While Buffett said their performance roughly amounts to matching the S&P 500, they've received some incentive pay that they only get if they outperform that benchmark.

"It's been better than I've done, so naturally I can't criticize," he said.

Healthcare Venture

Buffett tried to temper high hopes for the healthcare venture he's pursuing with Amazon (AMZN) and JPMorgan Chase (JPM) While he said they should name a chief executive officer in the next couple months and other companies have expressed interest in joining, Buffett acknowledged the many obstacles it faces.

"We will see what happens," he said.

 

Crypto Bashing

Buffett and Munger were definitive in their disdain for cryptocurrencies in answer to a question at the meeting. Buffett said they will likely come to a bad ending because their value depends on someone wanting to buy them for even more money.

They draw in a lot of "charlatans" and people of "less than stellar character," Buffett said.

Munger was even more forceful in his aversion to the assets.

"It's just disgusting," he said. It's like "somebody else is trading turds and you decide 'I can't be left out.'"

China Optimism

The pair were confident that trade tensions between the world's two largest economies wouldn't escalate into something that derails progress. And they were bullish on the prospects for China.

Buffett suggested he should do a deal in China this year because of the luck of the number eight there -- and his turning age 88 in August. American investors are missing out on opportunities in China, said Munger who has previously encouraged Buffett to invest there.

"It just looks like it's too hard sitting in Omaha to outsmart the Chinese market," Munger said. But it's where people should be looking, he said.

Musk And Moats

The meeting also ignited some sparring between Berkshire leaders and Elon Musk, the head of electric carmaker Tesla (TSLA), over the theory of moats around businesses.

"Elon says a conventional moat is quaint, and that's true of a puddle of water," Munger said referring to Musk's comments on an earnings call earlier in the week. "It's ridiculous. Warren does not intend to build an actual moat. Even though they're quaint."

While Buffett said it does seem like more moats have become susceptible to invasion recently, he still observes plenty of companies, such as Berkshire's See's Candies unit, where they're holding firm.

"Elon may turn things upside down in some areas, I don't think he'd want to take us on in candy," Buffett quipped. "There are some pretty good moats around."

Musk fired back at his fellow billionaires on Twitter Saturday.

"I'm starting a candy company & it's going to be amazing," Musk tweeted. "I am super super serious."

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This Smart Clothing Could Transform Wearables — And Your Wardrobe

Smart clothing that can warm up, cool down or lace itself could soon be part of daily life, and the market for connected clothing could hit $1 billion by 2020, with growth eclipsing other types of wearables.

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"Back To The Future" foresaw an era of video phone calls and personal drones. Now another prediction from the movie series could soon become part of daily life: smart clothing that can self-adjust to its wearer's needs.

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While an auto-drying jacket like Marty McFly's is some way off, smart clothes are already here. They can heat up, cool down, change color or even size themselves. In fact, the U.S. team at the Winter Olympics in South Korea wore self-heating jackets made by Ralph Lauren (RL).

Companies ranging from Nike (NKE) and Under Armour (UAA) to Google parent Alphabet (GOOGL) and Microsoft (MSFT) are developing smart clothing technology. As apparel makers hunt for tech know-how and tech nerds look for some fashion sense, the clothing trend is stitching together unlikely partners — and could reshape the apparel industry.

A partnership between Alphabet's Google and Levi Strauss could be a sign of things to come. They have brought to market the $350 Commuter X, a denim jacket that lets the user control a phone through the use of gestures alone.

The coming years will see a variety of "really wacky partnerships" between fashion companies and tech specialists, said International Data Corp. analyst Ramon Llamas.

"The first time you saw Google and Levi's you probably said to yourself, 'How did this happen?' " he said in an interview. "But over time it came to make sense and was a natural fit."

What Is Smart Clothing?

In addition to self-adjusting clothes, smart clothing includes internet-connected clothing. Juniper Research estimated last month that connected clothing is the fastest-growing segment of the wearable technology sector.

For now, smartwatches like the Apple (AAPL) watch and activity trackers like the Fitbit (FIT) dominate the overall wearables market. Juniper sees shipments of those devices hitting 137 million this year, with compound annual growth over the next two years projected at 31% for smartwatches and 6% for activity trackers.

Meanwhile, Juniper sees 102% compound annual growth in connected clothing, estimating it will be a $1 billion industry in 2020 with 7 million shipments. Just two years later, they will more than quadruple to 30 million shipments.

Smart clothes also differ from today's wearables in that they will have longer ranges and more accuracy. They also won't be limited to a small touch point at the wrist.

Making New Wearables Practical

Developers are trying to keep smart clothes practical too. Google and Levi's Commuter X jacket is machine washable and can go in a tumble dryer. But a "snap tag" that contains tiny electronics and a battery must first come off.

Google is developing a system that weaves technology into the very fabric of clothing as part of its Project Jacquard. Project leader Ivan Poupyrev says Google isn't planning to make its own apparel and instead aims to "empower existing apparel makers."

Loup Ventures managing partner Doug Clinton believes successful synergies between tech and apparel companies will be a key to success. That will help the smart clothes market be worth several billion dollars in the next few years, he estimates.

"I think we are going to see a lot of partnerships like that, and that's what is going to push the market forward," he said. "This combination of design and technology is a really important part of the story."

Smart Clothing Technology

Perhaps the most famous example of self-adjusting smart clothing on the market is Nike's HyperAdapt shoes, which boast "Back To The Future"-inspired self-tying laces. Stars such as tennis champion Serena Williams and soccer icon Cristiano Ronaldo promoted the first edition. Initially priced at $720, the highly coveted shoes are being sold on the secondhand market for more than $2,000 per pair.

A second version is in the works that will offer upgraded technology at more accessible prices. Nike's vice president for design and special projects, Tinker Hatfield, says the HyperAdapt 2.0 will be a performance basketball sneaker.

"We don't really know when it's going to hit the market or be in the NBA, but it will be there for sure," he said last September.

Microsoft has also explored the technological applications. Researchers previously unveiled a prototype smart scarf that users can heat up using a smartphone app.

South Korean electronics giant Samsung has a myriad of offerings, including a golf shirt that can warn wearers of the weather conditions and a solar-powered bag that can charge cellphones.

Meanwhile, Under Armour has brought to market shoes that track a runner's data through GPS. Shoes from the Under Armour Hovr line start at $110 and go as high as $140. The company also sells "athletic recovery sleepwear," pajamas that beam infrared radiation onto the wearer's body to boost recovery.

And Ralph Lauren looks to use the Winter Olympics publicity as a springboard to launch new smart clothes with smaller battery packs and controls linked to a mobile app. They could arrive on the market as early as this winter.

Smart Clothes That Change Colors

If Ralph Lauren's self-heating jacket is any indication, the new offerings will feature crisscrossing partnerships. The Olympic jacket's conductive ink came from DowDuPont (DWDP). Precision printing company Butler Technologies applied the ink. Apparel maker 99Degrees attached the heating system to the lining. Design and engineering firm Key Tech made the battery pack. Principled Design's ConnexI/O e-textile connector interface linked the battery to the jacket. And Better Team USA made the jackets.

That approach can be seen in New York-based Loomia, which started four years ago and makes flexible circuitry that can emit heat and/or light, as well as sense and track data.

It has worked with companies such as Google, Singapore-based circuit maker Flex (FLEX), British retailer TopShop and apparel maker VF Corp. A key part of Loomia's business plan is that it is not manufacturing individual pieces of clothing. Instead, it is providing products to commercial partners, such as apparel makers, on a mass scale.

Designer Julianna Bass collaborated with Loomia to develop a color-changing textile used in two dresses for her Spring/Summer18 collection. They were showcased on the catwalk at New York Fashion Week.

Loomia has also solved one of the great challenges for the technology: creating e-textiles that are machine washable. While the details are secret intellectual property, Loomia's breakthrough comes from the way its textile circuitry is patterned and the fact the fabric itself is a circuit. The custom insulation adds further protection.

Over the next year, heated jackets and boots with Loomia's technology will be coming to market. The materials are also seen as being useful for furniture.

"There was a three-year process finding the core technology in our lab, finding domestic partners who would be willing to try these processes to scale in the production of these textile circuits, and working through growing pains with our suppliers and manufacturers," Loomia CEO Janett Liriano said. "Now we're at the point where we are getting to market and selling these textile circuits B2B (business-to-business) to brands to integrate into their products."

But Will Anyone Actually Buy Smart Wear?

For mass adoption to occur, consumers will have to overcome a few anxieties. For one, battery-powered clothes, like phones, will carry the risk of exploding. But given the ubiquity of smartphones, wearables, and other personal gadgets, consumers have shown they can live with that risk.

Also, smart clothing will not be cheap. Ralph Lauren's self-heating jackets first went on sale for $2,500 and were later auctioned on eBay for $6,000. But consider that wildly successful Canada Goose (GOOS) sells parkas that aren't self-adjusting or laced with circuitry for $1,000.

Google's Poupyrev believes smart clothing technology trends make "ubiquitous connectivity" an attractive feature for consumers, who might see connected clothing as a practical investment. And Loup's Clinton thinks that a decade from now smart apparel products will be "almost the standard."

"Over the next few years it will be more experimental, getting consumers comfortable with the idea of having smart apparel," Clinton said. "There's always a bridge where you have to integrate the consumer into the new world. But I think once people see the benefits of the clothes, the demand for them will be pretty significant."

A spokeswoman for Julianna Bass said their color-changing clothes were well received at New York Fashion Week. Demand is expected to grow going forward.

"Color-changing offers the ability to extend the life of a garment and allows more flexible identifications," said Carolyn Thomas, a spokeswoman for the fashion house.

High-Tech Military Clothing And Industrial Uses

But even before smart clothes catch on with consumers, the path to mass adoption may begin with industry.

In the next five years, sectors like health care, pro sports, the military and emergency services like firefighting will adopt intelligent clothes, predicts scientist Pekka Tuomaala. He leads the Smart Clothes 2.0 project at the VTT Technical Research Centre of Finland. The scientist adds that companies have signaled particular interest in self-heating features.

"We human beings tend to be lazy," he said. "If our clothing would be able to help us we would most likely use such products and services."

IDC's Llamas also sees heavy industry putting connected clothes to use. For example, supervisors will be able to track the heart rate of workers and know if a break is necessary.

The military is another obvious candidate for such technology. British defense giant BAE Systems has developed an alternative use for e-textiles. Its Broadsword Spine is a power and data network built into clothes using conductive fabrics instead of wires and cables.

The technology allows electronic devices to be plugged straight into a vest, jacket or belt. Custom-built connectors hook directly into power and data sources via a USB port. It saves an estimated 40% of weight, a major benefit for infantrymen already loaded down with gear.

Back To The (Past's Idea Of) Future Clothing

Circling back to the world of Marty McFly and Doc Brown, Clinton believes the future is bright for smart clothes. He says future inventors will use both the science and the fiction of the past to inspire smart clothing designs.

"I think a lot of our movies in the past got the future pretty right. Even with 'Back To The Future,' Nike released self-tying sneakers so that became a reality," Clinton said. "In lots of ways fiction and entertainment inspire entrepreneurs to create the products they think are really cool when they see movies as kids.

"As the next generation thinks about what they can build on top of these products, innovation will just compound."

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These 6 Top Stocks Are Near Buy Points With Earnings Due

Nvidia, Booking Holdings, Cognizant Technology, Worldpay, Pegasystems and LGI Homes are near buy points with earnings this week.

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With the Nasdaq composite retaking its 50-day moving average Friday and the Dow Jones and S&P 500 index rebounding bullishly, more and more top stocks are breaking out or setting up near buy points. Nvidia (NVDA), Booking Holdings (BKNG), Cognizant Technology Solutions (CTSH), Worldpay (WP), Pegasystems (PEGA) and LGI Homes (LGIH) are growth stocks just below proper entries with earnings on tap this week.

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All six top stocks have Composite Ratings above 90 out of a best-possible 99. The Composite Rating takes into account a variety of fundamental and technical factors. Top stocks usually have high Composite Ratings before launching big runs. Nvidia has a Composite Rating of 94, Booking Holdings a 95 CR, Cognizant a 93 CR, Worldpay a 96, Pegasystems a 91 and LGI Homes a 95.

Nvidia

Nvidia, which reports Thursday, is expected to report a 49% sales gain to $2.89 billion as earnings swell 84% to $1.45 a share. Its graphics chips are used in everything from PC gaming to artificial intelligence to Bitcoin mining.

The stock has formed a double-bottom base with a buy point of 239.35. It rose 2.6% on Friday to 239.05, retaking its 50-day line.

Nvidia has a had long run and is in a late-stage base. Late-stage bases can work, but they are more prone to failure and less likely to reap big gains.

Booking Holdings

Booking Holdings is expected to report EPS of $10.70, up 8%, while revenue climbs 19% to $2.874 billion. Formerly known as Priceline, the online travel site has a consolidation buy point of 2,229.09. Booking stock closed Friday at 2,174.96.

Cognizant Technology Solutions

Cognizant Technology reports early Monday. The IT services firm's earnings should jump 25% to $1.05 a share as revenue grows 10% to $3.901 billion. Cognizant rose 1% to 82.17, back above its 50-day line. It's close to an 85.20 flat-base buy point.

Worldpay

Worldpay, forged from Vantiv's takeover of U.K.-based Worldpay, is one of many new top stocks in the payments field.

Shares closed Friday at 83, up 2% and back above its 50-day line. The stock is in a flat base with an 85.63 entry. You could also view Worldpay as being in a very shallow double-bottom pattern with an 83.94 entry.

Worldpay reports Q1 earnings early Thursday, with analysts expecting a 19% gain to 75 cents a share. Revenue should swell 78% to $838 million.

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Pegasystems

Pegasystems reports Thursday. The business process software firm's EPS is expected to sink 23% to 30 cents with revenue up 2% to $227 million. The stock is closing on resistance around 64 in a consolidation going back 11 months.

LGI Homes

LGI Homes, one of the top-rated builders, has a cup-with-handle base with a 75.62 buy point. The stock closed Friday at 73.23.

LGI Homes on Tuesday should deliver a 66% revenue spike to $271 million as EPS leaps 48% to 77 cents.

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The Biotech Just Broke Out On Hype Surrounding Its Muscle Disease Drugs

Sarepta rocketed to an 18-year high Friday amid furor surrounding its newest treatments for a fatal disease called Duchenne muscular dystrophy.

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Sarepta Therapeutics (SRPT) rocketed to an 18-year high Friday and broke out amid furor surrounding its newest treatments for a fatal muscle-wasting disease called Duchenne muscular dystrophy.

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On the stock market today, Sarepta popped 14.8% to close at 89.75. Earlier, the stock hit an 18-year high, rising as much as 16.4%. Shares soared past a buy point at 83.98 out of a cup-with-handle. Biotech stocks collectively lifted 1.5%.

The stock pop followed Sarepta's first-quarter earnings report. Sales of its only commercial drug, Exondys 51, came in at $64.6 million, below the consensus of analysts polled by Zacks Investment Research for $65 million, but above other estimates.

Meanwhile, "others exons are moving quickly," JMP Securities analyst Liisa Bayko said in a note. Sarepta's Exondys 51, golodirsen and casimersen work by skipping over faulty or misaligned sections of genetic code and are referred to as exon-skipping drugs.

Golodirsen, Casimersen On Track

Sarepta is on track to finish submitting a rolling application for golodirsen by year-end. It also plans to ask the Food and Drug Administration for guidance in a study of casimersen called Essence. Researchers are examining both as Duchenne muscular dystrophy treatments.

"If the FDA OKs the process and casimersen biopsies replicate preclinical data, the exon 45 skipper could also be submitted for approval with Essence, serving as a confirmatory trial for both golodirsen and casimersen," she said.

Piper Jaffray analyst Edward Tenthoff projects $35 million in golodirsen sales in 2019. He kept his overweight rating and 83 price target on Sarepta stock. JMP's Bayko, though, cut her price target to 90 from 95. She has an outperform rating on Sarepta.

The trouble is, "it was not all sunshine for the exon 51 skipper," known as Exondys 51, late Thursday, Bayko said. A European advisory group put out a negative trend vote on Exondys 51, saying the drug didn't meet the regulatory threshold for conditional approval.

Analysts Split On Exondys 51

Analysts have varied views on whether European officials will approve Exondys 51. Leerink analyst Joseph Schwartz called the news late Thursday "a mostly expected blip."

He cut his price target on Sarepta to 88 from 92, but reiterated his outperform rating.

"We believe eteplirsen (Exondys 51) could ultimately prevail at the European Medicines Agency," he said in a note. "Management will convene and seek input from the scientific advisory group that can contextualize the significance of their clinical data package."

JMP's Bayko is less bullish.

"We expect the re-examination to the completed around year-end 2018, but we think an approval is less likely and thus we lower our probability of success for Exondys 51 in Europe to 40% from 80% and push back an expected launch to 2021 from 2019," she said.

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Video Game Stocks Rise, Shake Off 'Fortnite' Threat

Video game stocks rose on Friday after an upbeat report from Activision Blizzard eased concerns that "Fortnite Battle Royale" from privately held Epic Games would hurt the major publishers.

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Video game stocks rose on Friday after an upbeat report from Activision Blizzard (ATVI) eased concerns that "Fortnite Battle Royale" from privately held Epic Games would hurt the major publishers.

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On a conference call with analysts late Thursday, Activision executives said the popularity of free-to-play "Fortnite" is likely to attract new game players into the market. That could spark innovation in the industry, they say.

In recent weeks, Wall Street analysts have fretted that "Fornite" could draw away gamer time and spending. That could negatively impact video game stocks Activision, Electronic Arts (EA) and Take-Two Interactive Software (TTWO).

Fortnite "is attracting new players of all ages and gender and it is helping gaming become even more mainstream entertainment," Activision Chief Executive Bobby Kotick told analysts. "Gaming is constantly evolving and innovating, which often expands the marketplace, and the success of 'Fortnite' is no exception."

Chief Financial Officer Spencer Neumann said Activision has seen "some near-term impact" from "Fortnite." Still, the company continues to post record results from its deep bench of game franchises, which include "Call of Duty," "Overwatch," "World of Warcraft" and "Candy Crush."

Activision Beats Views

The Santa Monica, Calif.-based firm earned an adjusted 38 cents a share, up 23% year over year. That's on adjusted sales of $1.38 billion, up 16% in the March quarter. Analysts expected 35 cents and $1.32 billion.

Activision shares jumped 4.5% to close at 69.84 on the stock market today. Among other video game stocks, EA climbed 2.9% to 123.64 and Take-Two increased 3.5% to 108.76.

Activision was the first of the major U.S. video game publishers to report March-quarter results. Electronic Arts is scheduled to report its fiscal fourth-quarter results on Tuesday. Take-Two is due to post its fiscal fourth-quarter results on May 16.

Fortnite Concerns Overblown

Activision's performance in the first quarter was impressive, considering that it had no major new product releases, Credit Suisse analyst Stephen Ju said in a note to clients. Plus, it faced competition from upstart "battle royale" games including "Fortnite" and "PlayerUnknown's Battlegrounds."

Battle royale games are multiplayer online games where the virtual combatants fight to the death to be the last one standing.

Analysts expect major publishers like Activision to add battle royale modes to upcoming games.

Ju reiterated his outperform rating on Activision and raised his price target to 85 from 84.

Baird analyst Colin Sebastian said "Fortnite" concerns appear "overblown." He expects the next "Call of Duty" release, due out Oct. 12, to have a battle royale mode.

"We note Activision's historical success as a 'fast follower' (e.g., music games, mobile) providing a degree of confidence that the company will find success in the new mode, where affinity for established franchises can be leveraged to drive higher engagement levels with new gameplay," Sebastian said in a report. He maintained his outperform rating on Activision with a price target of 80.

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Carbon Black IPO Pops In Hot Cybersecurity Market

The Carbon Black IPO raised $152 million, pricing 9 million shares at 19, the high end of its price range, in a $19 billion cybersecurity market.

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Cybersecurity software company Carbon Black (CBLK) delivered a solid initial public offering Friday, with shares soaring 26% on their first day of trading.

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The Carbon Black IPO raised $152 million, pricing 9 million shares at 19, the high end of its range. Shares then opened at 24.70 for a 30% gain. They ended regular trading at 23.94 on the stock market today.

Based in Waltham, Mass., the company has more than 3,700 customers and sees a market opportunity of $19 billion. Carbon Black provides a cybersecurity cloud solution that "continuously captures, records and analyzes rich, unfiltered endpoint data." Endpoint data includes mobile devices, laptops, PCs, servers and other cloud-connected devices on the network's perimeter.

Endpoint Protection

"Our solutions enable customers to predict, prevent, detect, respond to and remediate cyberattacks before they cause a damaging incident or data breach," the company says in its IPO prospectus. Endpoints are the primary focus of cyber attacks because they store valuable data that attackers seek to steal.

For 2017, Carbon Black reported revenue of $162 million, up 40% from the prior year, and a net loss of $55.8 million, vs. $44.5 million.

The biggest stock market winners typically make their major price moves within a few months or years of their initial public offering. So it pays to identify and track companies that are getting ready to go — or have recently gone — public.

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This Top Medical Stock Breaks Out After Its Beat-And-Raise

Idexx flirted with a breakout Friday after topping Wall Street's first-quarter expectations and raising some pieces of its 2018 guidance.

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Idexx Laboratories (IDXX) broke out Friday after the maker of veterinary diagnostic products topped Wall Street's expectations for the first quarter and raised its 2018 guidance for both earnings and revenue growth.

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On the stock market today, Idexx popped 8.4% to close at 212.20, blowing past a buy point of 202.36 and to an all-time high. Shares began forming a cup-with-handle base in March around the time they closed at the previous high of 207.14.

For its first quarter, Idexx reported $538 million in sales, increasing 16% year over year and 12% on an organic basis. That easily crushed the consensus view for $524.9 million in sales. Idexx noted that 13% organic growth in its companion animal group helped drive the strong results.

"We are pleased with the outstanding execution of our expanded commercial teams around the world in the first quarter, which resulted in 21% growth in premium instrument placements," Chief Executive Officer Jonathan Ayers said in a written statement.

Guidance Gets A Boost

Earnings of $1.01 per share grew 31% vs. the year-ago period and were up 32% on a constant-currency basis. That also topped the consensus for earnings of 93 cents per share.

Idexx also boosted its 2018 organic revenue outlook. It now sees 10.5%-12.5% growth on a constant-currency basis for the year. Adjusting for foreign exchange rates, Idexx kept its guidance for 12%-14% sales growth this year.

The firm also increased its full-year earnings guidance by 2 pennies at the midpoint to $4.06-$4.20 per share.

Idexx Labs was featured this past week on Investor's Business Daily's Leaderboard as a watchlist candidate.

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Alibaba Quarterly Earnings Beat As Mobile Users Reach 617 Million

Alibaba reported quarterly earnings before the market open Friday that topped views and guided full-year revenue growth above consensus views.

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Alibaba (BABA) on Friday reported fiscal fourth quarter earnings that topped views, with strong growth in e-commerce and cloud computing, as it guided full-year revenue growth above the consensus.

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Before the market open, the China e-commerce leader reported revenue of $9.9 billion. That beat Wall Street predictions of $9.2 billion and was up 76% from the year-ago quarter. It said adjusted earnings were 91 cents per share, beating views for 88 cents, according to analysts polled by Zacks Investment Research.

The company has a long string of quarters with double-digit growth in revenue and earnings.

Alibaba sees revenue growth for fiscal year 2019 topping 60%, or more than 50% excluding acquired companies.

"At first glance, we remain positive on shares as Alibaba reported another strong quarter, with results and guidance well above consensus expectations," Baird analyst Colin Sebastian wrote in a note to clients. He has an outperform rating on Alibaba and a price target of 220.

Shares were initially down about 1.5% then reversed for a 3.5% gain, to 188.89 on the stock market today. Alibaba shares are up about 55% over the last 12 months.

Double-Digit Gains

Core commerce revenue jumped 62% to $8.2 billion and cloud revenue more than doubled to $699 million. Further, digital media and entertainment revenue increased 34% to $840 million. And sales from innovation and other initiatives grew 8% to $158 million.

Alibaba is the leading provider of cloud computing services and the largest e-commerce company in China. It's main competitor is JD.com (JD).

Alibaba's annual active consumers on Chinese retail marketplaces climbed to 552 million. That's up 37 million from the 12-month period ended Dec. 31. Gross merchandise volume for the fiscal year climbed 28% to $768 billion.

"With the continuing rollout of our New Retail strategy, our e-commerce platform is developing into the leading retail infrastructure of China," said Chief Executive Daniel Zhang, in prepared remarks with the earnings release.

Among its retail initiatives is Hema, a chain of digitized physical supermarkets. The idea is to draw customers deeper into Alibaba's consumer-facing ecosystem. It's a strategy comparable to what e-commerce leader Amazon.com (AMZN) is doing with its acquisition of Whole Foods Market.

"During the past year we also doubled down on technology development, cloud computing, logistics, digital entertainment and local services so that we are in a position to capture consumption growth in China and other emerging markets," said Zhang.

Alibaba ended the quarter with 617 million monthly active users on mobile devices, up 6%, or 37 million, from the previous quarter.

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The post Alibaba Quarterly Earnings Beat As Mobile Users Reach 617 Million appeared first on Investor's Business Daily.

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