This week in tech: Alibaba's rosy quarter; PayPal's stablecoin; a plunge at Roblox

By Louis Juricic and Sarina Isaacs

Investing.com -- Here is your weekly Pro Recap on the biggest headlines out of tech this week: earnings out of Alibaba, Lyft , Roblox, and Twilio, and a big announcement from PayPal.

InvestingPro subscribers get tech headlines like these in real time. Never miss another market-moving alert.

Alibaba's 'all-around clean quarter'

Alibaba (NYSE:BABA) shares climbed Thursday after the China-based e-commerce giant posted fiscal Q1 adjusted core income Thursday that topped analyst estimates, boosted by strong consumer spending during a major shopping event in China in June.

Recent economic data, including numbers earlier this week showing a contraction in consumer prices, have sparked concerns over a sluggish post-pandemic recovery in China, the world's second-largest economy.

But combined revenues at Alibaba's Taobao and Tmall retail platforms still grew by 12% in the June quarter to 114.95B yuan (1 yuan = $0.1387), fueled by increased purchasing activity during the 618 shopping festival.

Meanwhile, Alibaba's cloud division rose to 25.12B yuan thanks in part to demand for its artificial intelligence computing products, in the latest sign of surging interest in the nascent technology.

DZ Bank upgraded the stock to Buy from Hold on this news, and Benchmark - which also calls the stock a buy - called the print an "all-around clean quarter."

Benchmark added that Alibaba’s new “consumer-centric approach has started bearing early fruit” as the company undergoes “a fundamental turnaround," and said it believes "a sustainable higher margin profile warrants earnings upward revision and a rerating on the stock" as multiple strategic assets "are back on a high-growth trajectory."

Benchmark's price target on BABA is $180.

U.S.-listed shares closed up 4.6% Thursday, but stepped back 2.1% for the week to $95.72.

PayPal breaks new ground with stablecoin launch

PayPal (NASDAQ:PYPL) has become the first large financial services company to launch its own stablecoin, as the group looks to fuel the adoption of digital tokens for payments.

The stablecoin - a type of crypto token pegged to an asset like the dollar - will be known as PayPal USD and backed by U.S. dollar deposits, short-term Treasuries, and similar cash equivalents, PayPal announced Monday. Paxos Trust Company will issue PayPal USD.

Eligible customers in the U.S. will now be able to purchase PayPal USD to make transfers between PayPal and external wallets, send person-to-person payments, and fund purchases.

The move comes as PayPal, which has been impacted by an easing in online spending after the pandemic, attempts to boost the digital payment options available to customers. Shares are down 40% over the past year - including a 16% slide last week on gross profit concerns after its earnings release - although the stock perked up by 2.7% Monday on the stablecoin news.

The stock retreated 2.4% for the week to $61.54.

Lyft shares take a wild ride after earnings

LYFT (NASDAQ:LYFT) shares seesawed last week on earnings and management commentary, ultimately finishing the week higher.

The company said on Wednesday that Q2 adjusted earnings per share totaled $0.16, beating expectations for a $0.01 loss, and revenue of $1.02 billion met the consensus figure. It also sees Q3 revenue of $1.13B to $1.15B, higher than Wall Street estimates.

While shares rose initially on Wednesday, they quickly fell during the session on cautious management commentary.

Bernstein analysts said the results show that headwinds facing Lyft's business will continue to persist through the rest of the year, but added, "We appreciate management getting out ahead of the tough Q4 set-up and offering some rough guidance."

Bernstein said investors can now focus on 2024, which it believes should see a reacceleration in revenue, but said: "the underlying earnings power and FCF generation of the model remain outstanding questions."

Susquehanna said management commentary led "to another noisy report," noting that its "competitive pricing initiative will continue to weigh on the unit economics, and the upcoming insurance renewals could add some noise on the cost side later in the year."

After its 10% slide Wednesday, however, shares more than erased that loss in the next session after the company said in a blog post that it will start displaying advertisements on its app as it looks to create a more stable source of revenue.

The move should help Lyft, whose business is completely dependent on ride-hailing, and it should also boost CEO David Risher's turnaround plans.

Lyft said it has partnered with adtech company, Rokt, to sell ads, and that its advertising partners include Bilt Rewards, Amazon's (NASDAQ:AMZN) Audible, and Comcast's (NASDAQ:CMCSA) Universal Pictures.

Shares closed the week up 4.9% to $11.38.

Roblox plummets on soft earnings, then picks up a couple upgrades

Roblox (NYSE:RBLX) shares were in free fall Wednesday after the company reported a Q2 loss of $0.46 per share, $0.02 worse than the expectations.

At the same time, the key metric of bookings came in at $780.7 million versus the $785.4M consensus, and the platform saw Average Daily Active Users (DAUs) rise 25% to 65.5 million.

Shares fell 22% on the news Wednesday - a sell-off that triggered upgrades at both Morgan Stanley and Wedbush.

Morgan Stanley upped the stock to Equal Weight given what they see as a more balanced risk-reward from current levels.

And Wedbush upgraded the stock to Outperform from Neutral with a price target of $37, arguing that Roblox “may have the most compelling growth trajectory among the video game names in our coverage universe after taking into account its user base size, its new products, and the potential to revisit its approach to profits.”

“The risk/reward profile has become favorable to the upside,” the analyst said in a note to clients.

Shares gained nearly 4% Thursday after the upgrades, but were still down by over 20% for the week to $29.82.

Twilio comes in well ahead of targets

Twilio (NYSE:TWLO) recorded Q2 EPS of $0.54, far better than the consensus target of $0.30, and revenue climbed 10% vs. a year earlier to a better-than-expected $1.04 billion.

Communications revenue was $913.1M, up 10% year-over-year, while Data & Applications revenue came in at $124.6M, representing a 12% year-over-year increase.

For Q3, the company expects EPS in the range of $0.33-$0.37, comfortably above the $0.30 consensus, although it also sees revenue at $998B to $99B, lower than the $1.02B average analyst estimate.

Following these results, Argus upgraded the stock to Buy from Hold with a price target of $72, and Barclays hiked the company's price target by $10 to $60 per share.

"Messaging volume stabilization supports stronger revenue beat and improving FY24 outlook, but we would like to see more contribution from the Data & Applications segment," Bernstein analysts said.

Bernstein said that, on an adjusted basis, the guidance is "the highest quarterly revenue guide they've ever had."

Shares were up 2.2% Wednesday and advanced 1% for the week overall, closing Friday at $61.94.

Scott Kanowsky, Senad Karaahmetovic, Liz Moyer, and Davit Kirakosyan contributed to this report.

***

Get ready to supercharge your investment strategy with our exclusive discounts.

Don't miss out on this limited-time opportunity to access cutting-edge tools, real-time market analysis, and expert insights. Join InvestingPro today and unlock your investing potential. Hurry, the Summer Sale won't last forever!