Analysts are remaining confident in Alibaba's (BABA) ability to perform, downplaying the trade standoff's impact on the company.
The company's net income gained 45% to $1.2 billion, while revenues rose 61% to $12.2 billion during the same quarter compared to a year ago.
In an earnings presentation this morning, the e-commerce and cloud giant noted that its user base and revenue continues to grow despite macroeconomic pressures from tariffs and trade.
Alibaba executive chairman Joseph Tsai told analysts that both China and Alibaba are well prepared to absorb the impact of trade tensions, as they stay focused on domestic economy.
"Alibaba's business is focused on capturing the Chinese domestic consumption opportunity and less reliant on Chinese exports," he explained. "We believe that Chinese government policy will continue to support imports into China to satisfy the rising demand of Chinese consumers."
He added that is the U.S. goods are priced out of the Chinese marketplace by tariffs, consumers will simply shift to domestic producers.
Growing Middle Class
Suntrust Robinson analyst Youssef Squalli likewise expressed his lack of concern on the macro factors in a note published after the earnings presentation this morning.
"While the stock was recently pressured by concerns around a trade war with the US, and a softening Chinese economy, we believe both are manageable for the company," he wrote. "On the trade war issue, BABA remains first and foremost a play on the rise of domestic Chinese consumption, with relatively small reliance on US consumers."
Currently, the company has an annual active user base of 576 million customers, adding 24 million from the previous year.
CFO Maggie Wei Wu specifically noted the company's ability to continue expanding user base in lower tier customers during the earnings this morning, lauding the company's price point initiatives as effective regardless of shifting economic conditions in China broadly.
"About 80% of these net adds are from lower tier cities as we broaden our offerings and services into those regions," she explained.
Squalli indicated that he believes this is a good indicator for the continued rise of the Chinese middle class despite macroeconomic pressures.
"In terms of the slowing Chinese economy, 80% of the new active consumers came from lower tier cities, reflecting strong demand from rising income and rising middle class, which we believe can be sustainable for some time," he wrote.
As a result, he maintained his buy rating on the stock and set a price target of $215.
To be sure, Chinese markets overall have indeed been stung by political bluster over trade and the imposition of billions in tariffs.
Year to date, the Shanghai Composite Index has fallen 17.61%, reflecting trouble in some of the largest Chinese companies, including Alibaba, which itself has fallen in market cap by almost $100 million since June.
However, as the bulk of its business is protected from trade-related external headwinds, both the company and analysts seem confident the e-commerce titan can wait out the storm.
"It is clear that nobody wins in a trade war," Tsai told analysts on the earnings call. "Over the years, China has become less reliant on exports so that the Chinese economy can withstand the imposition of tariffs on Chinese products."