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‘A Narrative of Fear’: Plunging Stocks Finally Heed Bond Signal

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Throw in a surprising drop in T","content":"<p>Growth is slowing while stock valuations expand and breadth narrows. Throw in a surprising drop in Treasury yields and the result is volatility.</p>\n<p>The S&amp;P 500 Index fell as much as 1.6% on Thursday, the most since May, as all major industries slipped. Commodity and financial shares led the retreat, the latest sign that the once-hot reflation trade is sputtering, with the delta variant of coronavirus quickly spreading andtalkabout monetary stimulus heating up in China.</p>\n<p>Just last week, the S&amp;P 500 rose to record for its seventh straight session, afeatnot seen since 1997. For eight months, the benchmark has gone without a peak-to-trough decline of 5%, the longest stretch since 2018.</p>\n<p>“When the market is as expensive as it is today, it doesn’t necessarily need a specific catalyst to change investor psychology,” said Matt Maley, chief market strategist for Miller Tabak + Co. “The Treasury market sniffed out these concerns earlier this week and now the stock market.”</p>\n<p>A wave of selling landed right at the open. The so-called Tick index, which compares stocks’ moves second-by-second, showed New York Stock Exchange companies trading on downticks exceeded those on upticks by 2,006 at one point. That’s the second-highest in the past year and a reading that before 2020 was seen only once since Bloomberg began tracking the data in 1989.</p>\n<p>Here is a compilation of investor and trader views on what’s behind Thursday’s pullback in the equity market.</p>\n<p>Adrian Miller, chief market strategist at Concise Capital Management LP:</p>\n<blockquote>\n “In our view, the bond market is the big brother of the equity market. And when the big brother does something the little brother follows, no questions asked.”“If we are to believe economic momentum can only cool from the current pace, investors need to determine how much should you pay for an economy returning to a normal glide path. And, instead of paying 22x 2021 SPX earnings or 20x 2022 earnings, perhaps the right value is 18x.”\n</blockquote>\n<p>Dan Suzuki, Richard BernsteinAdvisorsLLC’s deputy chief investment officer:</p>\n<blockquote>\n “There’s a growing narrative of fear out there as well. I think some investors are wondering whether the bond market is signaling slower growth, which is feeding the idea that the peak in growth/inflation numbers is going to signal the shift from positive surprises to negative surprises.”\n</blockquote>\n<p>Josh Wein, portfolio manager at Hennessy Funds:</p>\n<blockquote>\n “The S&amp;P is up 16% this year so certainly a giveback on the equities side is to be expected but on the bond side the narrative of inflation driven by labor shortages or product shortages or both -- subdued economic growth globally may be ratcheting down expectations and that is deflationary. I look at theten-yearand I think growth here will maybe be a little bit less than what we thought and also that the idea that we’re going to hit an inflation wall with theten-yearbeing at 1.3%, something doesn’t jive there. I’m going to believe the bond market before I believe people saying there is going to be inflation.”\n</blockquote>\n<p>Chris Grisanti, chief equity strategist at MAI Capital Management:</p>\n<blockquote>\n “I’m still of the opinion this is a head fake and that we will see higher rates ahead, with the strong GDP growth and corporate earnings growth -- we’ve stimulated this economy so well and the path for Covid, even though we have these blips, is toward normalcy. I would take advantage of the things going on in the marketplace right now. Like the travel-related stocks, I think they will come back. This is maybe one of the last opportunities to get on that bandwagon if you missed it.”\n</blockquote>\n<p>Chris Harvey, head of equity strategy at Wells Fargo &amp; Co.:</p>\n<blockquote>\n A sharp drop in yield “below 1.25% could cause equity portfolio managers to believe that something is wrong or broken. As a result, we see a growing possibility of a 5% sell-off in equities before earnings season.”\n</blockquote>","source":"lsy1584095487587","collect":0,"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>‘A Narrative of Fear’: Plunging Stocks Finally Heed Bond Signal</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\">\n‘A Narrative of Fear’: Plunging Stocks Finally Heed Bond Signal\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-07-09 17:31 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.bloomberg.com/news/articles/2021-07-08/-a-narrative-of-fear-plunging-stocks-finally-heed-bond-signal><strong>Bloomberg</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Growth is slowing while stock valuations expand and breadth narrows. Throw in a surprising drop in Treasury yields and the result is volatility.\nThe S&P 500 Index fell as much as 1.6% on Thursday, the...</p>\n\n<a href=\"https://www.bloomberg.com/news/articles/2021-07-08/-a-narrative-of-fear-plunging-stocks-finally-heed-bond-signal\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".IXIC":"NASDAQ Composite",".DJI":"道琼斯",".SPX":"S&P 500 Index"},"source_url":"https://www.bloomberg.com/news/articles/2021-07-08/-a-narrative-of-fear-plunging-stocks-finally-heed-bond-signal","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1122240967","content_text":"Growth is slowing while stock valuations expand and breadth narrows. Throw in a surprising drop in Treasury yields and the result is volatility.\nThe S&P 500 Index fell as much as 1.6% on Thursday, the most since May, as all major industries slipped. Commodity and financial shares led the retreat, the latest sign that the once-hot reflation trade is sputtering, with the delta variant of coronavirus quickly spreading andtalkabout monetary stimulus heating up in China.\nJust last week, the S&P 500 rose to record for its seventh straight session, afeatnot seen since 1997. For eight months, the benchmark has gone without a peak-to-trough decline of 5%, the longest stretch since 2018.\n“When the market is as expensive as it is today, it doesn’t necessarily need a specific catalyst to change investor psychology,” said Matt Maley, chief market strategist for Miller Tabak + Co. “The Treasury market sniffed out these concerns earlier this week and now the stock market.”\nA wave of selling landed right at the open. The so-called Tick index, which compares stocks’ moves second-by-second, showed New York Stock Exchange companies trading on downticks exceeded those on upticks by 2,006 at one point. That’s the second-highest in the past year and a reading that before 2020 was seen only once since Bloomberg began tracking the data in 1989.\nHere is a compilation of investor and trader views on what’s behind Thursday’s pullback in the equity market.\nAdrian Miller, chief market strategist at Concise Capital Management LP:\n\n “In our view, the bond market is the big brother of the equity market. And when the big brother does something the little brother follows, no questions asked.”“If we are to believe economic momentum can only cool from the current pace, investors need to determine how much should you pay for an economy returning to a normal glide path. And, instead of paying 22x 2021 SPX earnings or 20x 2022 earnings, perhaps the right value is 18x.”\n\nDan Suzuki, Richard BernsteinAdvisorsLLC’s deputy chief investment officer:\n\n “There’s a growing narrative of fear out there as well. I think some investors are wondering whether the bond market is signaling slower growth, which is feeding the idea that the peak in growth/inflation numbers is going to signal the shift from positive surprises to negative surprises.”\n\nJosh Wein, portfolio manager at Hennessy Funds:\n\n “The S&P is up 16% this year so certainly a giveback on the equities side is to be expected but on the bond side the narrative of inflation driven by labor shortages or product shortages or both -- subdued economic growth globally may be ratcheting down expectations and that is deflationary. I look at theten-yearand I think growth here will maybe be a little bit less than what we thought and also that the idea that we’re going to hit an inflation wall with theten-yearbeing at 1.3%, something doesn’t jive there. I’m going to believe the bond market before I believe people saying there is going to be inflation.”\n\nChris Grisanti, chief equity strategist at MAI Capital Management:\n\n “I’m still of the opinion this is a head fake and that we will see higher rates ahead, with the strong GDP growth and corporate earnings growth -- we’ve stimulated this economy so well and the path for Covid, even though we have these blips, is toward normalcy. I would take advantage of the things going on in the marketplace right now. Like the travel-related stocks, I think they will come back. This is maybe one of the last opportunities to get on that bandwagon if you missed it.”\n\nChris Harvey, head of equity strategy at Wells Fargo & Co.:\n\n A sharp drop in yield “below 1.25% could cause equity portfolio managers to believe that something is wrong or broken. As a result, we see a growing possibility of a 5% sell-off in equities before earnings season.”","news_type":1},"isVote":1,"tweetType":1,"viewCount":45,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":165384987,"gmtCreate":1624096313949,"gmtModify":1703828761490,"author":{"id":"3587081418303943","authorId":"3587081418303943","name":"yisheng","avatar":"https://static.tigerbbs.com/413133c50dd7c2ba830ff6edc94a37d5","crmLevel":2,"crmLevelSwitch":0,"followedFlag":false},"themes":[],"htmlText":"Good&nbsp;","listText":"Good&nbsp;","text":"Good","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/165384987","repostId":"1113942445","repostType":4,"isVote":1,"tweetType":1,"viewCount":11,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":166357820,"gmtCreate":1623993462860,"gmtModify":1703826004541,"author":{"id":"3587081418303943","authorId":"3587081418303943","name":"yisheng","avatar":"https://static.tigerbbs.com/413133c50dd7c2ba830ff6edc94a37d5","crmLevel":2,"crmLevelSwitch":0,"followedFlag":false},"themes":[],"htmlText":"Look good on alibaba&nbsp;","listText":"Look good on alibaba&nbsp;","text":"Look good on alibaba","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/166357820","repostId":"1175693382","repostType":4,"isVote":1,"tweetType":1,"viewCount":47,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"hots":[{"id":141029998,"gmtCreate":1625825911014,"gmtModify":1703749332146,"author":{"id":"3587081418303943","authorId":"3587081418303943","name":"yisheng","avatar":"https://static.tigerbbs.com/413133c50dd7c2ba830ff6edc94a37d5","crmLevel":2,"crmLevelSwitch":0,"followedFlag":false},"themes":[],"htmlText":"Like&nbsp;","listText":"Like&nbsp;","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/141029998","repostId":"1122240967","repostType":4,"repost":{"id":"1122240967","pubTimestamp":1625823077,"share":"https://www.laohu8.com/m/news/1122240967?lang=&edition=full","pubTime":"2021-07-09 17:31","market":"us","language":"en","title":"‘A Narrative of Fear’: Plunging Stocks Finally Heed Bond Signal","url":"https://stock-news.laohu8.com/highlight/detail?id=1122240967","media":"Bloomberg","summary":"Growth is slowing while stock valuations expand and breadth narrows. Throw in a surprising drop in T","content":"<p>Growth is slowing while stock valuations expand and breadth narrows. Throw in a surprising drop in Treasury yields and the result is volatility.</p>\n<p>The S&amp;P 500 Index fell as much as 1.6% on Thursday, the most since May, as all major industries slipped. Commodity and financial shares led the retreat, the latest sign that the once-hot reflation trade is sputtering, with the delta variant of coronavirus quickly spreading andtalkabout monetary stimulus heating up in China.</p>\n<p>Just last week, the S&amp;P 500 rose to record for its seventh straight session, afeatnot seen since 1997. For eight months, the benchmark has gone without a peak-to-trough decline of 5%, the longest stretch since 2018.</p>\n<p>“When the market is as expensive as it is today, it doesn’t necessarily need a specific catalyst to change investor psychology,” said Matt Maley, chief market strategist for Miller Tabak + Co. “The Treasury market sniffed out these concerns earlier this week and now the stock market.”</p>\n<p>A wave of selling landed right at the open. The so-called Tick index, which compares stocks’ moves second-by-second, showed New York Stock Exchange companies trading on downticks exceeded those on upticks by 2,006 at one point. That’s the second-highest in the past year and a reading that before 2020 was seen only once since Bloomberg began tracking the data in 1989.</p>\n<p>Here is a compilation of investor and trader views on what’s behind Thursday’s pullback in the equity market.</p>\n<p>Adrian Miller, chief market strategist at Concise Capital Management LP:</p>\n<blockquote>\n “In our view, the bond market is the big brother of the equity market. And when the big brother does something the little brother follows, no questions asked.”“If we are to believe economic momentum can only cool from the current pace, investors need to determine how much should you pay for an economy returning to a normal glide path. And, instead of paying 22x 2021 SPX earnings or 20x 2022 earnings, perhaps the right value is 18x.”\n</blockquote>\n<p>Dan Suzuki, Richard BernsteinAdvisorsLLC’s deputy chief investment officer:</p>\n<blockquote>\n “There’s a growing narrative of fear out there as well. I think some investors are wondering whether the bond market is signaling slower growth, which is feeding the idea that the peak in growth/inflation numbers is going to signal the shift from positive surprises to negative surprises.”\n</blockquote>\n<p>Josh Wein, portfolio manager at Hennessy Funds:</p>\n<blockquote>\n “The S&amp;P is up 16% this year so certainly a giveback on the equities side is to be expected but on the bond side the narrative of inflation driven by labor shortages or product shortages or both -- subdued economic growth globally may be ratcheting down expectations and that is deflationary. I look at theten-yearand I think growth here will maybe be a little bit less than what we thought and also that the idea that we’re going to hit an inflation wall with theten-yearbeing at 1.3%, something doesn’t jive there. I’m going to believe the bond market before I believe people saying there is going to be inflation.”\n</blockquote>\n<p>Chris Grisanti, chief equity strategist at MAI Capital Management:</p>\n<blockquote>\n “I’m still of the opinion this is a head fake and that we will see higher rates ahead, with the strong GDP growth and corporate earnings growth -- we’ve stimulated this economy so well and the path for Covid, even though we have these blips, is toward normalcy. I would take advantage of the things going on in the marketplace right now. Like the travel-related stocks, I think they will come back. This is maybe one of the last opportunities to get on that bandwagon if you missed it.”\n</blockquote>\n<p>Chris Harvey, head of equity strategy at Wells Fargo &amp; Co.:</p>\n<blockquote>\n A sharp drop in yield “below 1.25% could cause equity portfolio managers to believe that something is wrong or broken. As a result, we see a growing possibility of a 5% sell-off in equities before earnings season.”\n</blockquote>","source":"lsy1584095487587","collect":0,"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>‘A Narrative of Fear’: Plunging Stocks Finally Heed Bond Signal</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\">\n‘A Narrative of Fear’: Plunging Stocks Finally Heed Bond Signal\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-07-09 17:31 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.bloomberg.com/news/articles/2021-07-08/-a-narrative-of-fear-plunging-stocks-finally-heed-bond-signal><strong>Bloomberg</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Growth is slowing while stock valuations expand and breadth narrows. Throw in a surprising drop in Treasury yields and the result is volatility.\nThe S&P 500 Index fell as much as 1.6% on Thursday, the...</p>\n\n<a href=\"https://www.bloomberg.com/news/articles/2021-07-08/-a-narrative-of-fear-plunging-stocks-finally-heed-bond-signal\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".IXIC":"NASDAQ Composite",".DJI":"道琼斯",".SPX":"S&P 500 Index"},"source_url":"https://www.bloomberg.com/news/articles/2021-07-08/-a-narrative-of-fear-plunging-stocks-finally-heed-bond-signal","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1122240967","content_text":"Growth is slowing while stock valuations expand and breadth narrows. Throw in a surprising drop in Treasury yields and the result is volatility.\nThe S&P 500 Index fell as much as 1.6% on Thursday, the most since May, as all major industries slipped. Commodity and financial shares led the retreat, the latest sign that the once-hot reflation trade is sputtering, with the delta variant of coronavirus quickly spreading andtalkabout monetary stimulus heating up in China.\nJust last week, the S&P 500 rose to record for its seventh straight session, afeatnot seen since 1997. For eight months, the benchmark has gone without a peak-to-trough decline of 5%, the longest stretch since 2018.\n“When the market is as expensive as it is today, it doesn’t necessarily need a specific catalyst to change investor psychology,” said Matt Maley, chief market strategist for Miller Tabak + Co. “The Treasury market sniffed out these concerns earlier this week and now the stock market.”\nA wave of selling landed right at the open. The so-called Tick index, which compares stocks’ moves second-by-second, showed New York Stock Exchange companies trading on downticks exceeded those on upticks by 2,006 at one point. That’s the second-highest in the past year and a reading that before 2020 was seen only once since Bloomberg began tracking the data in 1989.\nHere is a compilation of investor and trader views on what’s behind Thursday’s pullback in the equity market.\nAdrian Miller, chief market strategist at Concise Capital Management LP:\n\n “In our view, the bond market is the big brother of the equity market. And when the big brother does something the little brother follows, no questions asked.”“If we are to believe economic momentum can only cool from the current pace, investors need to determine how much should you pay for an economy returning to a normal glide path. And, instead of paying 22x 2021 SPX earnings or 20x 2022 earnings, perhaps the right value is 18x.”\n\nDan Suzuki, Richard BernsteinAdvisorsLLC’s deputy chief investment officer:\n\n “There’s a growing narrative of fear out there as well. I think some investors are wondering whether the bond market is signaling slower growth, which is feeding the idea that the peak in growth/inflation numbers is going to signal the shift from positive surprises to negative surprises.”\n\nJosh Wein, portfolio manager at Hennessy Funds:\n\n “The S&P is up 16% this year so certainly a giveback on the equities side is to be expected but on the bond side the narrative of inflation driven by labor shortages or product shortages or both -- subdued economic growth globally may be ratcheting down expectations and that is deflationary. I look at theten-yearand I think growth here will maybe be a little bit less than what we thought and also that the idea that we’re going to hit an inflation wall with theten-yearbeing at 1.3%, something doesn’t jive there. I’m going to believe the bond market before I believe people saying there is going to be inflation.”\n\nChris Grisanti, chief equity strategist at MAI Capital Management:\n\n “I’m still of the opinion this is a head fake and that we will see higher rates ahead, with the strong GDP growth and corporate earnings growth -- we’ve stimulated this economy so well and the path for Covid, even though we have these blips, is toward normalcy. I would take advantage of the things going on in the marketplace right now. Like the travel-related stocks, I think they will come back. This is maybe one of the last opportunities to get on that bandwagon if you missed it.”\n\nChris Harvey, head of equity strategy at Wells Fargo & Co.:\n\n A sharp drop in yield “below 1.25% could cause equity portfolio managers to believe that something is wrong or broken. As a result, we see a growing possibility of a 5% sell-off in equities before earnings season.”","news_type":1},"isVote":1,"tweetType":1,"viewCount":45,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":165384987,"gmtCreate":1624096313949,"gmtModify":1703828761490,"author":{"id":"3587081418303943","authorId":"3587081418303943","name":"yisheng","avatar":"https://static.tigerbbs.com/413133c50dd7c2ba830ff6edc94a37d5","crmLevel":2,"crmLevelSwitch":0,"followedFlag":false},"themes":[],"htmlText":"Good&nbsp;","listText":"Good&nbsp;","text":"Good","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/165384987","repostId":"1113942445","repostType":4,"isVote":1,"tweetType":1,"viewCount":11,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":166357820,"gmtCreate":1623993462860,"gmtModify":1703826004541,"author":{"id":"3587081418303943","authorId":"3587081418303943","name":"yisheng","avatar":"https://static.tigerbbs.com/413133c50dd7c2ba830ff6edc94a37d5","crmLevel":2,"crmLevelSwitch":0,"followedFlag":false},"themes":[],"htmlText":"Look good on alibaba&nbsp;","listText":"Look good on alibaba&nbsp;","text":"Look good on alibaba","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/166357820","repostId":"1175693382","repostType":4,"repost":{"id":"1175693382","pubTimestamp":1623978463,"share":"https://www.laohu8.com/m/news/1175693382?lang=&edition=full","pubTime":"2021-06-18 09:07","market":"hk","language":"en","title":"Alibaba Stock: The Bottoming Process Looks To Be Forming Already","url":"https://stock-news.laohu8.com/highlight/detail?id=1175693382","media":"seekingalpha","summary":"Alibaba is probably the most undervalued growth stock right now.The company’s multiple growth drivers within a rapidly expanding market made its valuations look even more baffling.The short term technical picture may be turning bullish with a potential double bottom price action signal.When we take things into clearer perspective by comparing China’s growth rate and size of its market to that of the U.S. e-commerce market, we could see the huge differences in their sizes and growth rates as the ","content":"<p><b>Summary</b></p>\n<ul>\n <li>Alibaba is probably the most undervalued growth stock right now.</li>\n <li>The company’s multiple growth drivers within a rapidly expanding market made its valuations look even more baffling.</li>\n <li>The short term technical picture may be turning bullish with a potential double bottom price action signal.</li>\n <li>We discuss the company’s multiple growth drivers and let investors judge for themselves.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/05e63c77d4f3f3dc3d618e43044638bb\" tg-width=\"768\" tg-height=\"512\"><span>Yongyuan Dai/iStock Unreleased via Getty Images</span></p>\n<p><b>The Technical Thesis</b></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/7febf6ed056b0e3bc038321cdaad9b1c\" tg-width=\"1280\" tg-height=\"782\"><span>Source: TradingView</span></p>\n<p>Alibaba’s&nbsp;stock price has endured a terrible 8 months ever since its Ant Financial IPO was pulled in early Nov 20, with the stock languishing in the doldrums 34% off its high. When considering the health of its long term uptrend, it’s clear that BABA has a relatively strong uptrend bias and has generally been well supported along its key 50W MA. The only other time in the last 4 years that it lost its key 50W MA support level was during the 2018 bear market where BABA dropped about 40%, but was still well supported above the important 200W MA, which we usually consider as the “last line of defense”. Right now BABA is somewhat facing a similar situation again: down 34%, lost the 50W MA, but looks to be well supported above the 200W MA. In addition to that, one interesting observation in price action analysis may lead price action traders/investors to be especially bullish: a potential double bottom formation. BABA's price is seemingly going through a double bottom like it did during the 2018 bear market before it rallied strongly thereafter. As a result, BABA’s current level may offer a possible technical buy entry point now.</p>\n<p><b>BABA's Fundamental Thesis: Rapidly Expanding Growth Drivers</b></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/eba49f5881708929949c30628eedc5d4\" tg-width=\"934\" tg-height=\"578\"><span>Annual GMV. Data source: Company filings</span></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/a4d6c4ed3e2402f5af52b2dea8bab411\" tg-width=\"836\" tg-height=\"517\"><span>Annual e-commerce revenue. Data source: Company filings</span></p>\n<p>BABA’s GMV grew from 1.68T yuan to 7.49T yuan in just a matter of 7 years, which represented a CAGR of 23.8%, a truly amazing growth rate. We also saw its GMV growth being converted into revenue growth as its China commerce revenue grew from 7.67B yuan to 473.68B yuan, at a CAGR of 51% over the last 10 years. While its international footprint remains considerably smaller, it still grew at a CAGR of 30.42% over the last 10 years, which was by no means slow.</p>\n<p>Even though China’s e-commerce market is expected to grow considerably slower at a CAGR of 12.4% over the next three years, from 13.8T yuan, equivalent to $2.16T in 2021 to 19.6T yuan,equivalent to $3.06T by 2024, the massive size of the market still offers tremendous upside potential for BABA and its closest competitors to grow into.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ffe2dee43f267e1d1399c68e3ca60f36\" tg-width=\"600\" tg-height=\"371\"><span>E-commerce revenue in the U.S. Data source: Statista</span></p>\n<p>When we take things into clearer perspective by comparing China’s growth rate and size of its market to that of the U.S. e-commerce market, we could see the huge differences in their sizes and growth rates as the U.S. e-commerce market is only expected to grow at a CAGR of 4.67% from 2021 to 2025, which is significantly slower than China’s 12.4%. In addition, the U.S. market is also expected to reach about $563B in total revenue, which is 18% of what the China market is expected to be worth by then.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0d5a8d0d8a6a2dcdf667a6f33c6c9771\" tg-width=\"1280\" tg-height=\"702\"><span>Peers EBIT Margin and Projected EBIT Margin. Data source: S&amp;P Capital IQ</span></p>\n<p>Even though Alibaba has been facing increased competitive pressures from its fast growing key competitors: JD.com(NASDAQ:JD)and Pinduoduo(NASDAQ:PDD), BABA has already been operating a much more profitable business (both EBIT and FCF), and is expected to continue delivering strong profitability moving forward, which should give the company tremendous flexibility to compete head on with JD and PDD in its quest to extend its leadership. Investors may observe that BABA’s EBIT margin was affected by the one-off administrative penalty of $2,782M that was reflected in its SG&amp;A, and therefore skewed its EBIT margin to the downside.</p>\n<p>One important move was the company’s decision to further its investment in the Community Marketplace, which is PDD’s main e-commerce strategy that saw PDD gain a total of&nbsp;823M AAC&nbsp;in its latest quarter as compared to BABA’s 891M AAC. PDD’s AAC growth is truly phenomenal considering it had only&nbsp;100M AAC in Q2’C17&nbsp;as compared to BABA’s 466M AAC in the same period.</p>\n<p>Therefore, the momentum of growth has surely swung over to the Community Marketplace segment and BABA would need to pull out its big guns (which it has) to compete for dominance with PDD and JD.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/3b83b69b08b1f4b11a26393c8e6eead5\" tg-width=\"600\" tg-height=\"371\"><span>Market size of community group buying in China. Data source: iiMedia Research</span></p>\n<p>Even though the expected total market size of 102B yuan by 2022 represented only about 21.5% of BABA’s FY 21 China commerce revenue, the expected rapid CAGR of 44.22% over 3 years from 2019 to 2022 cannot be missed by BABA. Although the market is still relatively small, BABA cannot allow the current leader in this market: PDD to so easily dominate and gobble up the early high growth rates at the ignorance of everyone else. Certainly BABA must compete and fight for its place in this segment and strive for early leadership to prevent PDD from extending its lead.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/b97b2b4a8a182dc9846d8fb7e4039877\" tg-width=\"1280\" tg-height=\"770\"><span>PDD profitability metrics &amp; revenue growth forecast. Data source: S&amp;P Capital IQ</span></p>\n<p>We could observe from the above chart that PDD is expected to continue growing its revenue rapidly over the next few years, even though they are expected to normalize subsequently. More importantly, PDD is also expected to increasingly improve its EBIT and FCF profitability moving forward. This shows that the Community Marketplace segment is an highly important growth driver that BABA must use its strength to exploit in order to deny PDD’s claim to undisputed leadership so early on in the game.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/3aadc32155b4108426a1a982e3b5b1c2\" tg-width=\"640\" tg-height=\"360\"><span>China public cloud spending. Source:China Internet Watch; Canalys</span></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/1c1538b9f7bdc8d6d35a72d9acf8ecbc\" tg-width=\"600\" tg-height=\"371\"><span>Size of China public cloud market. Data source: CAICT; Sina.com.cn</span></p>\n<p>BABA has a 40% share in China’s public cloud market, way ahead of its key competitors. However, it’s important to note that despite this leadership, BABA is still in heavy investment mode to continue growing its market share as China’s public cloud market is expected to grow from 26.48B yuan in 2017 to 230.74B yuan by 2023, which would represent a CAGR of 43.4%, an incredibly stellar growth rate. This is especially clear when we compare China’s growth rate to the worldwide growth rate (see below) as public cloud spending worldwide is expected to grow from $145B in 2017 to $397B by 2022, that would represent a CAGR of 22.3%.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/06198c569504bc303c34563041dfb294\" tg-width=\"600\" tg-height=\"371\"><span>Worldwide public cloud spending. Data source: Gartner</span></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8482037f60575f964053ab732496bee3\" tg-width=\"1176\" tg-height=\"700\"><span>Worldwide public cloud market share. Source:CnTechPost; Gartner</span></p>\n<p>Therefore, I don’t find it surprising that Ali Cloud has continued to extend its lead over Alphabet’s(NASDAQ:GOOGL)(NASDAQ:GOOG)GCP with a market share of 9.5% in 2020. While AMZN remains the clear leader in the market, its market share has been coming down considerably as public cloud spending continues to expand, indicating that there is a huge potential for growth for multiple players to exist. With BABA’s leadership in the rapidly expanding Chinese market, I’m increasingly bullish on the future profit and FCF contribution from this segment to BABA’s performance over time. Although BABA’s cloud segment has not been EBIT profitable yet (FY 21 EBIT margin: -15%, FY 20 EBIT margin: -17.5%), it’s also useful to note that GCP has also not been profitable for Alphabet as well (FY 20 EBIT margin: -42.9%, FY 19 EBIT margin: -52%). Therefore, we need to give BABA some time to scale up its cloud services in APAC and in China where it is expected to have stronger leadership to allow it to grow faster and investors should expect this to be a highly profitable segment over time.</p>\n<p><b>BABA's Valuations Look Highly Compelling</b></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/62a087c4b3ef7efc2c5dde813e3b959d\" tg-width=\"1000\" tg-height=\"600\"><span>NTM TEV / EBIT 3Y range.</span></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/b2605c0e5ad364a7a43929fef204595c\" tg-width=\"1280\" tg-height=\"687\"><span>EV / Fwd EBIT and EV / Fwd Rev trend. Data source: S&amp;P Capital IQ</span></p>\n<p>When we consider BABA's TEV / EBIT historical range, where the 3Y mean read 33.54x, BABA’s EV / Fwd EBIT trend certainly imply a hugely undervalued stock as BABA is still expected to grow its revenue and operating profits rapidly. However, as we wanted to obtain greater clarity over how its counterparts are also valued, we thought it would be useful if we value BABA’s EBIT over a set of benchmark companies that is presented below.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/d27873e676dfb23c98d4a69aa5861e02\" tg-width=\"1280\" tg-height=\"1117\"><span>Peers EV / EBIT Valuations. Data source: S&amp;P Capital IQ</span></p>\n<p>By using a blend of historical and forward EBIT, we could see that BABA’s EV / EBIT really looks undervalued when compared to the median value of the set of observed values from the benchmark companies. We derived a fair value range for BABA of $294.98 at the midpoint of the range, that represented a potential upside of 40.5% based on the current stock price of $210.</p>\n<p><b>Risks to Assumptions</b></p>\n<p>Now, it’s obviously baffling to watch how Mr. Market has decided to discount BABA to such an extent as if the company has lost all its key sources of growth, when in fact there is still so much potential upside coming from its commerce segment, the new marketplace initiatives and its growing Ali Cloud segment, among others. The main realistic reason that we identified for the stock's underperformance would simply be regulatory risk. We think investors should acknowledge that this risk is very real and at times huge Chinese companies have found themselves to be subjected to extra scrutiny (which is nothing new in fact) by the Chinese government. What’s critical here is that the Chinese government seemingly has significant clout over the behavior and actions of their tech behemoths that at times may be largely unpredictable. The market certainly hates unpredictability and therefore they may have significantly discounted BABA as a result of that. If investors are not able to handle uncertainty with regard to potentially unpredictable regulatory actions and their aftermath, then BABA may not be appropriate for you. However, if you believe that this is just a blip in BABA’s long journey, then you would surely find BABA's valuations extremely attractive right now, coupled with a long term mindset.</p>\n<p><b>Wrapping It All Up</b></p>\n<p>Alibaba has continued to deliver solid results that demonstrated the strong capability of the company to execute well. As the company continues to operate within a market with so many growth drivers that are expected to drive the company’s future growth, investors should find the current valuations highly attractive.</p>","collect":0,"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 Stock: The Bottoming Process Looks To Be Forming Already</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 Stock: The Bottoming Process Looks To Be Forming Already\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-06-18 09:07 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4435297-alibaba-stock-bottoming-process-forming-buy-now><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nAlibaba is probably the most undervalued growth stock right now.\nThe company’s multiple growth drivers within a rapidly expanding market made its valuations look even more baffling.\nThe short...</p>\n\n<a href=\"https://seekingalpha.com/article/4435297-alibaba-stock-bottoming-process-forming-buy-now\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"BABA":"阿里巴巴","09988":"阿里巴巴-SW"},"source_url":"https://seekingalpha.com/article/4435297-alibaba-stock-bottoming-process-forming-buy-now","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1175693382","content_text":"Summary\n\nAlibaba is probably the most undervalued growth stock right now.\nThe company’s multiple growth drivers within a rapidly expanding market made its valuations look even more baffling.\nThe short term technical picture may be turning bullish with a potential double bottom price action signal.\nWe discuss the company’s multiple growth drivers and let investors judge for themselves.\n\nYongyuan Dai/iStock Unreleased via Getty Images\nThe Technical Thesis\nSource: TradingView\nAlibaba’s stock price has endured a terrible 8 months ever since its Ant Financial IPO was pulled in early Nov 20, with the stock languishing in the doldrums 34% off its high. When considering the health of its long term uptrend, it’s clear that BABA has a relatively strong uptrend bias and has generally been well supported along its key 50W MA. The only other time in the last 4 years that it lost its key 50W MA support level was during the 2018 bear market where BABA dropped about 40%, but was still well supported above the important 200W MA, which we usually consider as the “last line of defense”. Right now BABA is somewhat facing a similar situation again: down 34%, lost the 50W MA, but looks to be well supported above the 200W MA. In addition to that, one interesting observation in price action analysis may lead price action traders/investors to be especially bullish: a potential double bottom formation. BABA's price is seemingly going through a double bottom like it did during the 2018 bear market before it rallied strongly thereafter. As a result, BABA’s current level may offer a possible technical buy entry point now.\nBABA's Fundamental Thesis: Rapidly Expanding Growth Drivers\nAnnual GMV. Data source: Company filings\nAnnual e-commerce revenue. Data source: Company filings\nBABA’s GMV grew from 1.68T yuan to 7.49T yuan in just a matter of 7 years, which represented a CAGR of 23.8%, a truly amazing growth rate. We also saw its GMV growth being converted into revenue growth as its China commerce revenue grew from 7.67B yuan to 473.68B yuan, at a CAGR of 51% over the last 10 years. While its international footprint remains considerably smaller, it still grew at a CAGR of 30.42% over the last 10 years, which was by no means slow.\nEven though China’s e-commerce market is expected to grow considerably slower at a CAGR of 12.4% over the next three years, from 13.8T yuan, equivalent to $2.16T in 2021 to 19.6T yuan,equivalent to $3.06T by 2024, the massive size of the market still offers tremendous upside potential for BABA and its closest competitors to grow into.\nE-commerce revenue in the U.S. Data source: Statista\nWhen we take things into clearer perspective by comparing China’s growth rate and size of its market to that of the U.S. e-commerce market, we could see the huge differences in their sizes and growth rates as the U.S. e-commerce market is only expected to grow at a CAGR of 4.67% from 2021 to 2025, which is significantly slower than China’s 12.4%. In addition, the U.S. market is also expected to reach about $563B in total revenue, which is 18% of what the China market is expected to be worth by then.\nPeers EBIT Margin and Projected EBIT Margin. Data source: S&P Capital IQ\nEven though Alibaba has been facing increased competitive pressures from its fast growing key competitors: JD.com(NASDAQ:JD)and Pinduoduo(NASDAQ:PDD), BABA has already been operating a much more profitable business (both EBIT and FCF), and is expected to continue delivering strong profitability moving forward, which should give the company tremendous flexibility to compete head on with JD and PDD in its quest to extend its leadership. Investors may observe that BABA’s EBIT margin was affected by the one-off administrative penalty of $2,782M that was reflected in its SG&A, and therefore skewed its EBIT margin to the downside.\nOne important move was the company’s decision to further its investment in the Community Marketplace, which is PDD’s main e-commerce strategy that saw PDD gain a total of 823M AAC in its latest quarter as compared to BABA’s 891M AAC. PDD’s AAC growth is truly phenomenal considering it had only 100M AAC in Q2’C17 as compared to BABA’s 466M AAC in the same period.\nTherefore, the momentum of growth has surely swung over to the Community Marketplace segment and BABA would need to pull out its big guns (which it has) to compete for dominance with PDD and JD.\nMarket size of community group buying in China. Data source: iiMedia Research\nEven though the expected total market size of 102B yuan by 2022 represented only about 21.5% of BABA’s FY 21 China commerce revenue, the expected rapid CAGR of 44.22% over 3 years from 2019 to 2022 cannot be missed by BABA. Although the market is still relatively small, BABA cannot allow the current leader in this market: PDD to so easily dominate and gobble up the early high growth rates at the ignorance of everyone else. Certainly BABA must compete and fight for its place in this segment and strive for early leadership to prevent PDD from extending its lead.\nPDD profitability metrics & revenue growth forecast. Data source: S&P Capital IQ\nWe could observe from the above chart that PDD is expected to continue growing its revenue rapidly over the next few years, even though they are expected to normalize subsequently. More importantly, PDD is also expected to increasingly improve its EBIT and FCF profitability moving forward. This shows that the Community Marketplace segment is an highly important growth driver that BABA must use its strength to exploit in order to deny PDD’s claim to undisputed leadership so early on in the game.\nChina public cloud spending. Source:China Internet Watch; Canalys\nSize of China public cloud market. Data source: CAICT; Sina.com.cn\nBABA has a 40% share in China’s public cloud market, way ahead of its key competitors. However, it’s important to note that despite this leadership, BABA is still in heavy investment mode to continue growing its market share as China’s public cloud market is expected to grow from 26.48B yuan in 2017 to 230.74B yuan by 2023, which would represent a CAGR of 43.4%, an incredibly stellar growth rate. This is especially clear when we compare China’s growth rate to the worldwide growth rate (see below) as public cloud spending worldwide is expected to grow from $145B in 2017 to $397B by 2022, that would represent a CAGR of 22.3%.\nWorldwide public cloud spending. Data source: Gartner\nWorldwide public cloud market share. Source:CnTechPost; Gartner\nTherefore, I don’t find it surprising that Ali Cloud has continued to extend its lead over Alphabet’s(NASDAQ:GOOGL)(NASDAQ:GOOG)GCP with a market share of 9.5% in 2020. While AMZN remains the clear leader in the market, its market share has been coming down considerably as public cloud spending continues to expand, indicating that there is a huge potential for growth for multiple players to exist. With BABA’s leadership in the rapidly expanding Chinese market, I’m increasingly bullish on the future profit and FCF contribution from this segment to BABA’s performance over time. Although BABA’s cloud segment has not been EBIT profitable yet (FY 21 EBIT margin: -15%, FY 20 EBIT margin: -17.5%), it’s also useful to note that GCP has also not been profitable for Alphabet as well (FY 20 EBIT margin: -42.9%, FY 19 EBIT margin: -52%). Therefore, we need to give BABA some time to scale up its cloud services in APAC and in China where it is expected to have stronger leadership to allow it to grow faster and investors should expect this to be a highly profitable segment over time.\nBABA's Valuations Look Highly Compelling\nNTM TEV / EBIT 3Y range.\nEV / Fwd EBIT and EV / Fwd Rev trend. Data source: S&P Capital IQ\nWhen we consider BABA's TEV / EBIT historical range, where the 3Y mean read 33.54x, BABA’s EV / Fwd EBIT trend certainly imply a hugely undervalued stock as BABA is still expected to grow its revenue and operating profits rapidly. However, as we wanted to obtain greater clarity over how its counterparts are also valued, we thought it would be useful if we value BABA’s EBIT over a set of benchmark companies that is presented below.\nPeers EV / EBIT Valuations. Data source: S&P Capital IQ\nBy using a blend of historical and forward EBIT, we could see that BABA’s EV / EBIT really looks undervalued when compared to the median value of the set of observed values from the benchmark companies. We derived a fair value range for BABA of $294.98 at the midpoint of the range, that represented a potential upside of 40.5% based on the current stock price of $210.\nRisks to Assumptions\nNow, it’s obviously baffling to watch how Mr. Market has decided to discount BABA to such an extent as if the company has lost all its key sources of growth, when in fact there is still so much potential upside coming from its commerce segment, the new marketplace initiatives and its growing Ali Cloud segment, among others. The main realistic reason that we identified for the stock's underperformance would simply be regulatory risk. We think investors should acknowledge that this risk is very real and at times huge Chinese companies have found themselves to be subjected to extra scrutiny (which is nothing new in fact) by the Chinese government. What’s critical here is that the Chinese government seemingly has significant clout over the behavior and actions of their tech behemoths that at times may be largely unpredictable. The market certainly hates unpredictability and therefore they may have significantly discounted BABA as a result of that. If investors are not able to handle uncertainty with regard to potentially unpredictable regulatory actions and their aftermath, then BABA may not be appropriate for you. However, if you believe that this is just a blip in BABA’s long journey, then you would surely find BABA's valuations extremely attractive right now, coupled with a long term mindset.\nWrapping It All Up\nAlibaba has continued to deliver solid results that demonstrated the strong capability of the company to execute well. As the company continues to operate within a market with so many growth drivers that are expected to drive the company’s future growth, investors should find the current valuations highly attractive.","news_type":1},"isVote":1,"tweetType":1,"viewCount":47,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"lives":[]}