Alibaba: The End Hasn't Come

seekingalpha2021-04-23

Summary Alibaba's shares are down a lot from last year's highs, as a reaction to the market worrying about a range of issues. None of them seems to be too material, though, and the fear that has ...

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Comments

sasa11
2021-05-20
sasa11
Long baba
377tkr
2021-05-12
377tkr
Any target entry price? Can share? Of course each person entry point is different. I don’t have any yet.
TerenceD
2021-05-01
TerenceD
That’s ??
DenDenBear
2021-04-30
DenDenBear
Reply and like thanks
- rlew:
  sure!
LCT15
2021-04-28
LCT15
Good article
darrentanjm
2021-04-27
darrentanjm
Major buy

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: The End Hasn't Come\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 20:38 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420852-alibaba-the-end-hasnt-come><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nAlibaba's shares are down a lot from last year's highs, as a reaction to the market worrying about a range of issues.\nNone of them seems to be too material, though, and the fear that has ...</p>\n\n<a href=\"https://seekingalpha.com/article/4420852-alibaba-the-end-hasnt-come\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"09988","symbol_name":"阿里巴巴-SW","start_time":0,"source_url":"https://seekingalpha.com/article/4420852-alibaba-the-end-hasnt-come","article_id":"1170805005","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1170805005","pubTimestamp":1619181499,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Alibaba's shares are down a lot from last year's highs, as a reaction to the market worrying about a range of issues.None of them seems to be too material, though, and the fear that has gripped the market has resulted in a quite inexpensive valuation.Alibaba is a high-growth mega-corp that trades like a low-growth company. This provides considerable upside potential in the long run.Alibabahas widely underperformed the broad market and most of its tech peers over the last six months, mainly due t","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"09988":"阿里巴巴-SW","BABA":"阿里巴巴"},"translate_title":"阿里巴巴-SW：末日还没有到来","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"09988":0.9,"BABA":0.9},"content_text":"Summary\n\nAlibaba's shares are down a lot from last year's highs, as a reaction to the market worrying about a range of issues.\nNone of them seems to be too material, though, and the fear that has gripped the market has resulted in a quite inexpensive valuation.\nAlibaba is a high-growth mega-corp that trades like a low-growth company. This provides considerable upside potential in the long run.\n\nPhoto by Andrew Burton/Getty Images News via Getty Images\nArticle Thesis\nAlibaba(NYSE:BABA)has widely underperformed the broad market and most of its tech peers over the last six months, mainly due to worries about regulatory pressures, anti-trust legalization, etc. Most of those issues have been resolved now, and it looks like Alibaba's value wasn't really damaged to a large degree. Alibaba remains a leading tech & consumer play in high-growth China that continues to trade at a clear discount compared to most US-based tech peers. There are risks, but Alibaba seems attractive at current prices.\nHundreds Of Billions Destroyed\nLooking at Alibaba's market capitalization over the last year, there is a very clear decline in how the market values the company over time:\nData by YCharts\nFrom a peak in fall 2020, Alibaba's market cap has declined by 25% or a little more than $200 billion to date. The reasoning for that is not based on any type of fundamental slow-down, revenue decline, or similar, showcased by Alibaba's excellent results during the most recent quarters:\nSource: Investor presentation\nNot only has Alibaba continued to deliver revenue growth of well above 30% since then, but the company also continued to make progress in attractive high-growth spaces such as cloud computing. Alibaba's cloud unit broke even for the first time since inception as its scale is increasing, which bodes well for the future bottom-line contribution of this unit. Last but not least, Alibaba's free cash flow generation remained strong, and its margins remained attractive.\nThus the big drop in the value the market ascribes to Alibaba's shares must have been caused by something else, which is market sentiment and psychology. Some negative news around Ant Financial's postponed IPO made the market fear looming regulatory pressures on Alibaba. This was exacerbated by anti-trust and anti-monopoly investigations. These were, of course, negatives, but not to the extent that the market priced them in.\nLooking at Alibaba's market capitalization, which declined by more than $200 billion over the last six months, one could assume that regulators would look to impose a fine of dozens or even hundreds of billions of dollars on Alibaba. That was, however, not the outcome of the investigations.\nThings Are Clearing Up For Alibaba\nInstead, Chinese regulators gave a slap on the wrist, seeking a$2.75 billion finefrom Alibaba. That sounds like a lot, but it really isn't all that much when we consider Alibaba's immense size:\nSource: Alibaba filing\nAlibaba generated cash of $15.8 billion through its operations during the most recent quarter, or a little over $5 billion a month. The fine that was imposed on the company thus is equal to about two weeks' worth of cash flows. Is that a positive? No, it's a negative. Is it a large negative? In fact, it seems barely noticeable compared to Alibaba's size. We can also look at how this fine compares to Alibaba's cash holding of more than $50 billion, and, once again, we are talking about a very minor fine relative to how the company is doing. What could be a company-breaking fine for any mid-sized business will barely leave a dent in Alibaba's cash holding, and with this issue being resolved now, it is no wonder that shares have jumped following the ruling.\nThe other theme that had pressured Alibaba's shares, Ant Financial's regulatory issues, has more or less been resolved as well. Ant Financial will be turned into a financial holding company, there will be some additional oversight, and there were some forced divestments. But this didn't break Ant Financial at all, and it seems questionable whether the hit to Alibaba's value was really all that material, as Alibaba is only a minority holder in Ant Financial anyways.\nAgain, these developments that occurred over the last six months aren't positives, but they are not extremely large negatives. A $200+ billion drop in Alibaba's market capitalization seemed way overblown. The good thing about market overreactions, however, is that one can use them to get attractive entry prices (in case markets are overreacting to the downside) or attractive exit prices (in cases where markets are too exuberant).\nIn Alibaba's case, the best time to load up on shares was when they traded for around $220 several times over the last six months. They have risen to a somewhat higher level since then, partially due to the market's realization that the $2.75 billion fine wasn't all that material, but Alibaba's shares are still looking quite inexpensive even now.\nAlibaba Is An Outstanding Value Among Tech Mega-Caps\nLooking at the largest companies in the world, by market capitalization, we see that most of them are tech companies, or at least tech-leaning, such as Tesla (TSLA). Alibaba stands out among those due to a quite low valuation:\nData by YCharts\nWhile others trade at 30-40 times net earnings mostly, with Amazon (AMZN) and especially Tesla trading at even higher valuations, Alibaba is valued at a very inexpensive 21 times forward earnings. This also represents a discount compared to broad US equity markets, which are trading for around 25 times forward earnings right now - at least partially due to the heavy weight of companies such as Apple (AAPL), Amazon, and Tesla.\nOne may be inclined to conclude that Alibaba is trading at the lowest valuation among those companies due to a below-average growth outlook or below-average fundamentals, but that isn't true.\nData by YCharts\nWhile the other mega-caps have grown by 5%-40% in 2020, with an average of around 20%, Alibaba has delivered revenue growth of 35%-50% in each quarter of the current fiscal year. Clearly, Alibaba is growing faster than the average mega-cap, and most analysts expect that this will not change any time soon.\nThanks to exposure to the high-growth, online-focused consumer market in its home country China, combined with excellent growth in additional franchises such as its cloud computing unit, Alibaba should be able to deliver compelling growth for the foreseeable future. Alibaba is an excellent play for the ongoing expansion of the Chinese economy, which just delivered record growth on a year-over-year basis.\nWith a clean balance sheet thanks to a $50+ billion cash position, strong free cash flows, and attractive margins, Alibaba also seems like a very appropriate choice from a quality perspective. To me, the company doesn't look inferior to the major US tech companies on that basis.\nRisks To Consider\nThere are, of course, still risks that one should consider before investing. It is possible that regulators demand more change from Alibaba, or impose additional fines, although that seems relatively unlikely for now as the current anti-monopoly investigation has just been concluded. Nevertheless, Alibaba is of course dependent to some degree on the goodwill of Chinese regulators and politicians.\nOn top of that, due to a consumer-focused business model, Alibaba would seem quite vulnerable to any external shock that hits Chinese consumers hard. Since the country has weathered the current pandemic quite well and continues to deliver above-average economic growth rates, I don't think this is a likely scenario in the foreseeable future, though.\nI don't see Alibaba as an especially risky investment at all, but these factors should still be considered before making an investment, as should other potential risks that could affect the company. One should mention, however, that the top US companies are also, at least to some extent, dependent on regulatory goodwill and could see an impact from an economic downturn, thus Alibaba is not necessarily a much riskier choice than Facebook, for example.\nTakeaway\nAlibaba is a high-growth player with a strong market position in a country that continues to deliver above-average economic growth. Alibaba has strong fundamentals, and yet it trades at a quite inexpensive valuation, both on an absolute basis as well as compared to how other mega-caps are valued.\nAlibaba isn't a risk-less stock, but the risks seem quite bearable to me. At just 17 times 2022's net earnings, Alibaba looks attractive to me. Since the Ant Financial and anti-monopoly issues have cleared up, I believe that Alibaba's shares could rise considerably from the current level, as sentiment hopefully improves. It would be great to see management encourage such an upward move by being more aggressive with share repurchases, but there is no guarantee for that.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":130301151,"gmtCreate":1621509338873,"gmtModify":1704358776865,"author":{"id":"3574975730290141","authorId":"3574975730290141","name":"sasa11","avatar":"https://static.tigerbbs.com/12e058ce6727186880f07f79a7025a0d","vip":1,"crmLevel":4,"crmLevelSwitch":0},"htmlText":"Long baba","listText":"Long baba","text":"Long baba","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/130301151","repostId":1170805005,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":193211178,"gmtCreate":1620790105294,"gmtModify":1704348447669,"author":{"id":"3582001642809284","authorId":"3582001642809284","name":"377tkr","avatar":"https://static.tigerbbs.com/25cbfadab64a300119ffe30a37937ff2","vip":1,"crmLevel":7,"crmLevelSwitch":0},"htmlText":"Any target entry price? Can share? Of course each person entry point is different.&nbsp;I don’t have any yet.","listText":"Any target entry price? Can share? Of course each person entry point is different.&nbsp;I don’t have any yet.","text":"Any target entry price? Can share? Of course each person entry point is different. I don’t have any yet.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/193211178","repostId":1170805005,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":101038312,"gmtCreate":1619829607636,"gmtModify":1704335406674,"author":{"id":"3573966231987456","authorId":"3573966231987456","name":"TerenceD","avatar":"https://static.tigerbbs.com/046d570a2a5c6793332b041c7628d5c3","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":2,"crmLevelSwitch":1},"htmlText":"That’s ??&nbsp;","listText":"That’s ??&nbsp;","text":"That’s ??","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/101038312","repostId":1170805005,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":103202684,"gmtCreate":1619783775648,"gmtModify":1704272301820,"author":{"id":"3576147606699436","authorId":"3576147606699436","name":"DenDenBear","avatar":"https://static.tigerbbs.com/01e983ba302bc271159224fa4bb390e6","vip":1,"crmLevel":3,"crmLevelSwitch":0},"htmlText":"Reply and like thanks","listText":"Reply and like thanks","text":"Reply and like thanks","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/103202684","repostId":1170805005,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4189318,"gmtCreate":1619840948086,"gmtModify":1680786462720,"authorId":3579069562080854,"author":{"id":3579069562080854,"authorId":3579069562080854,"name":"rlew","avatar":"https://static.tigerbbs.com/0e67e92847edf3f9ac98a20a6913b536","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":103202684,"type":1,"supId":0,"prevId":0,"content":"sure!","text":"sure!","html":"sure!"}],"langContent":"EN"},{"id":100507918,"gmtCreate":1619619842434,"gmtModify":1704726947604,"author":{"id":"3581496418554017","authorId":"3581496418554017","name":"LCT15","avatar":"https://static.tigerbbs.com/c80d0fa5d2104afed54088e78f8c338b","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"Good article","listText":"Good article","text":"Good article","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/100507918","repostId":1170805005,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":377894920,"gmtCreate":1619512697260,"gmtModify":1704725176758,"author":{"id":"3575719295092987","authorId":"3575719295092987","name":"darrentanjm","avatar":"https://static.tigerbbs.com/db13c0920fa0c70b27d1ad93e31c4979","vip":1,"crmLevel":4,"crmLevelSwitch":0},"htmlText":"Major buy&nbsp;","listText":"Major buy&nbsp;","text":"Major buy","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/377894920","repostId":1170805005,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":261,"commentSize":122,"repostSize":0,"favoriteSize":14,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1170805005"}