Alibaba: Wall Street Is Sleeping - Catalysts Are Already In Motion

seekingalpha2023-07-24

The bearish thesis against Alibaba (NYSE:BABA) is well known at this point, centering around the regulatory risk in the event of rising US-China tensions. But the market seems to be ignoring the clear...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

LearnerAdi
2023-07-25
LearnerAdi
One wrong comment by the company may cause another dive in the price (clamp down by China authorities)
WilliamQuan
2023-07-24
WilliamQuan
Bona nocte, wall street, bona nocte
liltexas
2023-07-24
liltexas
I'm so not up to play with this is this the life we live now
Sunshinekim
2023-07-24
Sunshinekim
Regulatory interventions are not to be trifled with where the Chinese govt is concerned. Can go south almost immediately.

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2353601598?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2023-07-24 07:39","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2353601598","market":"us","top_or_hot":-1,"title":"Alibaba: Wall Street Is Sleeping - Catalysts Are Already In Motion","media":"seekingalpha","content":"<div>\n<p>The bearish thesis against Alibaba (NYSE:BABA) is well known at this point, centering around the regulatory risk in the event of rising US-China tensions. But the market seems to be ignoring the clear...</p>\n\n<a href=\"https://seekingalpha.com/article/4618980-alibaba-wall-street-sleeping-catalysts-already-in-motion\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Wall Street Is Sleeping - Catalysts Are Already In Motion</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\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: Wall Street Is Sleeping - Catalysts Are Already In Motion\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-07-24 07:39 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4618980-alibaba-wall-street-sleeping-catalysts-already-in-motion><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The bearish thesis against Alibaba (NYSE:BABA) is well known at this point, centering around the regulatory risk in the event of rising US-China tensions. But the market seems to be ignoring the clear...</p>\n\n<a href=\"https://seekingalpha.com/article/4618980-alibaba-wall-street-sleeping-catalysts-already-in-motion\">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":"BK4558","symbol_name":"双十一","start_time":0,"source_url":"https://seekingalpha.com/article/4618980-alibaba-wall-street-sleeping-catalysts-already-in-motion","article_id":"2353601598","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2353601598","pubTimestamp":1690155541,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Sean Gallup The bearish thesis against Alibaba (NYSE:BABA) is well known at this point, centering around the regulatory risk in the event of rising US-China tensions. But the market seems to be ignori","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4558":"双十一","BK4587":"ChatGPT概念","LU0651946864.USD":"贝莱德新兴市场股票收益A2","BK4575":"芯片概念","BK4220":"综合零售","BK4535":"淡马锡持仓","BK4524":"宅经济概念","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","LU1051768304.USD":"贝莱德新兴市场股票收益A6","BK4538":"云计算","BK4527":"明星科技股","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","BK4526":"热门中概股","BK4588":"碎股","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","BK4503":"景林资产持仓","BK4502":"阿里概念","BK4505":"高瓴资本持仓","09988":"阿里巴巴-W","BK4504":"桥水持仓","BK4581":"高盛持仓","BABA":"阿里巴巴","BK4548":"巴美列捷福持仓","BK4565":"NFT概念","IE00B0JY6N72.USD":"PINEBRIDGE GLOBAL EMERGING MARKETS FOCUS EQUITY \"A\" (USD) ACC","LU1048596156.SGD":"Blackrock Asian Growth Leaders A2 SGD-H","BK4579":"人工智能","BK4122":"互联网与直销零售","BK4554":"元宇宙及AR概念","LU0821914370.USD":"贝莱德亚洲成长领袖A2","LU1688375341.USD":"贝莱德中国灵活股票基金","BK4531":"中概回港概念","LU1046422090.SGD":"Fidelity Pacific A-SGD","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","BK4533":"AQR资本管理(全球第二大对冲基金)"},"translate_title":"阿里巴巴-SW：华尔街正在沉睡——催化剂已经在运转","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BABA":1,"09988":0.6},"content_text":"The bearish thesis against Alibaba (NYSE:BABA) is well known at this point, centering around the regulatory risk in the event of rising US-China tensions. But the market seems to be ignoring the clear signals being sent from management that they are focused on extracting shareholder value. BABA has seen its valuation reset to arguably distressed levels amidst the rising interest rate environment, and management continues to work towards spinning off various business units in order to address the conglomerate discount. This is a company which has net cash and investments equivalent to nearly 60% of the market cap, and trades at around 10x earnings even before accounting for that fact. At this point, any successful execution on spinning out the various business units, starting with its cloud division, is likely to lead to substantial upside - downside scenarios seem to focus on management being unable to accomplish those goals. While risks have not declined for this name, I am increasing my aggression in buying the stock and have made it a core position in my portfolio.BABA Stock PriceThe valuation reset in the tech sector has led many tech stocks to trade at pre-pandemic levels. The adjustment has been even more severe at BABA as it is still trading at the same levels as it did in 2014 when it came public.Data by YChartsI last covered BABA in May, where I discussed the potential upside from the proposed spinoffs. The stock has not gone up as expected, as Wall Street has suddenly lost interest in these events that in theory should help realize considerable shareholder value.BABA Stock Key MetricsIn its most recent quarter, BABA saw strong growth in most of its various business categories, but overall revenue growth hovered at 2% YOY as its most critical commerce operations declined 3% YOY. The big story was clearly the boost in profitability, as adjusted EBITA grew 60% YOY. This marks the company’s return to a double-digit adjusted EBITDA margin after it dipped to 8% last year.March 2023 Quarterly PresentationBABA was able to generate such strong growth in adjusted EBITA largely due to its cost reduction initiatives, as it was able to reduce losses substantially at almost every loss-generating unit, as well as boost margins by 500 bps in the core commerce operations.March 2023 Quarterly PresentationBABA generated $4.7 billion in free cash flow in the quarter, making up 124% of adjusted EBITA. The company spent $1.8 billion repurchasing stock, an arguably modest amount given the extent of the undervaluation and solid free cash flow generation, but still impressive considering that share repurchases are still a newer development for this company.March 2023 Quarterly PresentationBABA ended the quarter with $63.4 billion in net cash plus $66 billion in additional equity investments.March 2023 Quarterly PresentationTogether, those made up roughly 59% of the market cap. On the conference call, management noted that while the Chinese economy continues to recover following the easing of pandemic restrictions, “consumer confidence and spending power still need further momentum.” Management also noted that there is fierce competition from the various consumption platforms. Such commentary might confuse American investors, given that BABA is often called “The Amazon of China.” But one must remember that the cost of living is much lower in China, making any logistical advantage less relevant as compared to the United States.I suspect that many investors are now focused mostly on management’s efforts to split up the business units and spin off as many of them to shareholders. Management reiterated plans to fully spin off the cloud intelligence division and complete a public listing in the next 12 months. Management also noted that their board of directors has approved both Freshippo (BABA’s retail grocery segment) and Cainiao (their logistics groups) to explore an IPO over the next 18 months. BABA owns a 67% equity interest in Cainiao. Management stated that the business reason for splitting up these business units (outside of realizing shareholder value) is that their Taobao and Tmall businesses would no longer have to direct cash to fund those losses, but could instead reinvest in growth.Management also reiterated their commitment to share repurchases, disclosing that the company had repurchased another $2.3 billion in ADSs in the 1.5 months subsequent to the quarter. I would caution against extrapolating that management has increased their aggression of the share repurchase program, but it is a good sign to know that this upcoming quarter already has a sizable amount of repurchases executed. With BABA stock being so cheap, management alignment with shareholders is a quality that can not be understated.Is BABA Stock A Buy, Sell, or Hold?As of recent prices, BABA was trading hands at just around 10x earnings.Seeking AlphaYes, that is non-GAAP earnings, but it should be noted that share-based compensation (the most typically protested non-GAAP adjustment) is only around 22% of non-GAAP net income.March 2023 Quarterly PresentationAs noted previously, BABA has net cash and equity investments making up over 50% of the market cap - this is not reflected in that valuation and reflects additional upside.The anticipated spin-offs may create value due to investors beginning to value the company on a sum-of-the-parts basis. When valuing BABA on a price to earnings basis, only China commerce is offering positive value contribution as that is the only segment generating positive net income. If we “zero out” the losses from these other segments (arguably a reasonable decision considering that these segments must have at least positive value), then we would need to adjust earnings by around 25% higher. $22.7 billion in China commerce net income valued at 10x earnings implies $227 billion in equity value from this segment alone.Based on a 6x sales multiple for the cloud division (yielding $73 billion in equity value), a $20 billion value for Cainiao (at a 67% equity interest), we arrive at another $86 billion in equity value. If we include only $58 billion in net cash (ignoring the equity investments on the balance sheet) then we arrive at $371 billion in projected value, implying a stock price of $144 per share. That is already suggesting ample upside, and we have neither assigned value to many other proposed spin-offs nor increased the 10x earnings multiple on the China commerce operations.What are the key risks? The risks should not be understated. The Chinese government remains a wildcard here, not just due to what kind of negative actions they might do in the future, but also due to the perception of it placed on the valuation. Even if BABA management follows through with these spin-offs, it is possible that the total valuation remains compressed if Wall Street remains concerned about regulatory intervention. I am of the view that the share repurchases go a long way towards helping to improve this sentiment, but the share repurchases admittedly can be increased further, and a dividend might be more efficient at this point. It is also possible that management is unable to execute on the proposed spin-offs, or the spin-offs result in bloated cost structures that somehow come back to become a net negative for the company. There isn’t really a price at which these risks are “priced in” but I see tremendous potential upside for the stock and the near term catalysts are in motion. I rate the stock a buy, but caution that this position requires monitoring (and ideally hedging).Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":201482730623016,"gmtCreate":1690217498380,"gmtModify":1690218675973,"author":{"id":"4107657165988180","authorId":"4107657165988180","name":"LearnerAdi","avatar":"https://community-static.tradeup.com/news/211b55c9f8f2d6aabdea5f1995a70d59","vip":1,"crmLevel":2,"crmLevelSwitch":1,"idStr":"4107657165988180","authorIdStr":"4107657165988180"},"htmlText":"One wrong comment by the company may cause another dive in the price (clamp down by China authorities)","listText":"One wrong comment by the company may cause another dive in the price (clamp down by China authorities)","text":"One wrong comment by the company may cause another dive in the price (clamp down by China authorities)","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/201482730623016","repostId":2353601598,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":201434934894664,"gmtCreate":1690206070823,"gmtModify":1690206074930,"author":{"id":"3578686285736482","authorId":"3578686285736482","name":"WilliamQuan","avatar":"https://static.tigerbbs.com/d7ce36b4de3c373f1ae0b40da77a0b3f","vip":1,"crmLevel":8,"crmLevelSwitch":0,"idStr":"3578686285736482","authorIdStr":"3578686285736482"},"htmlText":"Bona nocte, wall street, bona nocte","listText":"Bona nocte, wall street, bona nocte","text":"Bona nocte, wall street, bona nocte","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/201434934894664","repostId":2353601598,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":201392051761280,"gmtCreate":1690195609650,"gmtModify":1690195890289,"author":{"id":"4150619638686852","authorId":"4150619638686852","name":"liltexas","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"4150619638686852","authorIdStr":"4150619638686852"},"htmlText":"I'm so not up to play with this is this the life we live now&nbsp;","listText":"I'm so not up to play with this is this the life we live now&nbsp;","text":"I'm so not up to play with this is this the life we live now","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/201392051761280","repostId":2353601598,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":201255004913896,"gmtCreate":1690165106512,"gmtModify":1690166786073,"author":{"id":"4108879863251380","authorId":"4108879863251380","name":"Sunshinekim","avatar":"https://community-static.tradeup.com/news/4aa06f704f2b302b4af731a1567add49","vip":1,"hat":"https://static.tigerbbs.com/a3dee1aa3a3a3c1814833a4d3f8a5669","crmLevel":6,"crmLevelSwitch":1,"idStr":"4108879863251380","authorIdStr":"4108879863251380"},"htmlText":"Regulatory interventions are not to be trifled with where the Chinese govt is concerned. Can go south almost immediately.&nbsp;","listText":"Regulatory interventions are not to be trifled with where the Chinese govt is concerned. Can go south almost immediately.&nbsp;","text":"Regulatory interventions are not to be trifled with where the Chinese govt is concerned. Can go south almost immediately.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/201255004913896","repostId":2353601598,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":24,"commentSize":4,"repostSize":2,"favoriteSize":2,"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":"4.29.2","shortVersion":"4.29.2","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/2353601598"}