Equities Update: Alibaba, Anglo American, BAE, Glencore…

AI helps drive strong top and bottom line at Alibaba

Adam Vettese, market analyst at investment platform eToro, says: “Retail and e-commerce colossus Alibaba has topped estimates for both earnings and revenue for its third quarter, and investors are likely to find this an encouraging set of results, particularly the rapid acceleration in AI-related product revenue.

“Alibaba is much more than just a retailer and over this quarter the company has managed to deliver double-digit revenue growth on multiple fronts. Chinese AI developments have been of keen interest to the market in recent weeks, of course, and the Cloud Intelligence segment of the business achieved an impressive 13% growth in revenue, highlighting how Alibaba is one of the leaders in the field. Another bright spot is the business’ remarkable rate of international expansion, which saw a whopping 36% bump in revenue at the retail commerce level.

“If there are areas of concern, revenue growth at its Chinese consumer retail arms Taobao and Tmall was more modest than in other areas of the business and, as has been a common story with many major AI players, the company has seen substantial tightening in its level of free cash flow from heavy expenditures in cloud infrastructure. Market response has been favourable, though, with shares in Alibaba climbing more than 6% in pre-market US trading.”

Anglo American betting big on copper as diamonds lose their sparkle

Mark Crouch, market analyst at eToro, says: “In what’s been a rough ride for mining in 2024, Anglo American investors might feel like they’ve got a seat on a runaway mine train as the miner posted annual losses of $3.1bn. The underperformance, which is mainly due the company’s floundering diamond unit, has prompted a strategic pivot from the mining giant.

“After fending off BHP’s takeover attempt last year, Anglo will hope it’s a decision they don’t come to regret. The business is now set to take a new direction with a focus on copper production, selling up underperforming nickel and coal interests while spinning off operations in platinum and diamonds.

“The radical change in direction does make strategic sense however, with demand for copper near all-time highs and expected to rise, while the rapidly growing synthetic diamond industry makes light work of their mining competitors, investors will only hope the ups and downs are worth it, and that they don’t look back at BHP’s offer as a missed opportunity.”

BAE Systems* (BA-LON,1321p, Accumulate) – Full-year Results – The global defence group today reported better than expected results for the 2024 financial year.

Underlying revenue growth was good across all operating segments. Underlying operating margin was flat at 10.6%. There was strong order intake with the order backlog increasing 11.5% to £77.8bn, or almost three years of revenue.

We see BAE as well-positioned to benefit from increasing geo-political tensions, not just in Europe but globally. It has a diverse range of programmes, across different domains and customers, with no outsized exposure to any single programme, reducing its risk relative to peers. It has a range of programme durations that allow strong revenue visibility for the next decade from signed orders, follow-on orders and sustainment and modernisation opportunities. Management is targeting organic revenue growth of 5%-7% from existing programmes, with potential for additional growth from new opportunities and product innovation. With strong operational performance and share buybacks, this should allow double-digit earnings per share growth over the medium-term.

BAE is currently trading at 17.5x December 2025 consensus earnings, a premium to its 10-year average, reflecting the higher earnings growth expectations. The shares are also at a premium to those of European peers, which we see as justified given its long programme durations underpinning its revenue. We retain our Accumulate recommendation on BAE Systems. (Accumulate)

• Reported revenue increased 14%, while underlying sales, which includes joint ventures, were also up 14% to £28.3bn, beating consensus of £28.2bn. The increase was driven by strong programme performance across all sectors and the benefit of M&A activities in the year, including the acquisition of Ball Aerospace (now Space & Mission Systems (SMS)).
• Operating profit was up 4%, with underlying operating profit up 14%, due to the amortisation of intangible assets from the acquisition of Ball Aerospace. Underlying operating margin was flat at 10.6%.
• Reported earnings per share were up 6%, while underlying earnings per share were up 10% to 68.5p, beating consensus of 67.0p.
• Electronic Systems sales grew 35% on a constant currency basis and including the benefit of SMS. Organic growth was 9% driven by the precision strike & sensing and commercial aviation businesses.
• Platforms & Services sales grew 15% on a constant currency basis. The US combat vehicles business grew following demand for Armored Multi-Purpose Vehicles (AMPV) and Bradley vehicles, while Hägglunds and Bofors both grew with European demand for CV90 and Archer.
• Air sector sales grew 7% on a constant currency basis, driven by growth in MBDA as well as the impact of acquisitions in FalconWorks, which have expanded capabilities in Uncrewed Air Systems (UAS).
• Maritime sales grew 12% on a constant currency basis, driven by the ramp-up of the Hunter Class frigate programme in Australia, design work on SSN-AUKUS and demand for munitions.
• Cyber & Intelligence sales grew 6% on a constant currency basis.
• Order intake was £33.7bn, down from £37.7bn in 2023. Significant orders during the year included a contract worth £4.6bn for delivery of the first three Hunter Class frigates in Australia, orders of c.$2.5bn (£2.0bn) for CV9035 MkIIIC vehicles for Sweden and Denmark and orders totalling £1.1bn for BAE work share on additional Typhoon aircraft, including 25 for the Spanish Air Force and up to 24 for the Italian Air Force. The order backlog increased 11.5% to £77.8bn, or almost three years of revenue.
• Guidance for 2025 is for sales to increase by 7%-9%, underlying operating profit to increase by 8%-10% and free cash flow to exceed £1.1bn. Cumulative free cash flow from 2025-2027 is expected to exceed £5.5bn.

Nicolas Ziegelasche, Head of Equity Research at Killik & Co

Glencore shares slip as lower commodity prices weigh

Adam Vettese, market analyst at eToro, says: “Despite returning $2.2 billion to shareholders, Glencore is propping up the FTSE this morning after posting a second consecutive year of falling profit. It should be noted this was against a very high bar when we saw soaring metals prices which have since cooled, and as such so have miners such as Glencore’s bumper profits.

“Trump’s potential tariffs on cars and semiconductors also threaten to weigh on demand for metals such as copper which Glencore and many of its sector peers will be watching closely.

“Shares have dipped over 30% from their 2024 peak which could tempt those investors looking to pick up a decent dividend-paying stock at a discount, although there are factors at play that could put further pressure on the price in the interim.”