Alibaba: Candidate For The Record Book Of Mispriced Stocks

Seeking Alpha2022-11-29

SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...

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ISSEY1413
·2022-11-30
[Great] [Great] [Great] [Great] [Great]
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Dragon1976
·2022-11-30
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·2022-11-30
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·2022-11-30
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·2022-11-30
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·2022-11-30
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·2022-11-30
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ML808
·2022-11-30
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Aurum
·2022-11-30
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小金钱袋
·2022-11-30
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·2022-11-30
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Ghtan
·2022-11-30
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·2022-11-30
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jgaldon
·2022-11-30
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·2022-11-30
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So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","kind":"news","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":9962509013,"gmtCreate":1669796271633,"gmtModify":1676538245033,"author":{"id":"3580024367177542","authorId":"3580024367177542","name":"ISSEY1413","avatar":"https://static.tigerbbs.com/3aae359514ad4455bfc28cf62f608a5e","vip":1,"hat":"https://static.tigerbbs.com/a3dee1aa3a3a3c1814833a4d3f8a5669","crmLevel":7,"crmLevelSwitch":1,"idStr":"3580024367177542","authorIdStr":"3580024367177542"},"htmlText":"[Great]&nbsp;[Great]&nbsp;[Great]&nbsp;[Great]&nbsp;[Great]&nbsp;","listText":"[Great]&nbsp;[Great]&nbsp;[Great]&nbsp;[Great]&nbsp;[Great]&nbsp;","text":"[Great] [Great] [Great] [Great] [Great]","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962509013","repostId":1173876241,"repostType":2,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962635517,"gmtCreate":1669768055339,"gmtModify":1676538238398,"author":{"id":"3581667755269715","authorId":"3581667755269715","name":"Dragon1976","avatar":"https://static.tigerbbs.com/490476b6972495f8a3fcdcab33e93aa0","vip":1,"hat":"https://static.tigerbbs.com/a3dee1aa3a3a3c1814833a4d3f8a5669","crmLevel":2,"crmLevelSwitch":1,"idStr":"3581667755269715","authorIdStr":"3581667755269715"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962635517","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962874425,"gmtCreate":1669765960768,"gmtModify":1676538237596,"author":{"id":"3574730309796268","authorId":"3574730309796268","name":"PhilipGoh","avatar":"https://static.tigerbbs.com/d6085185a57dcb9a222e871338387428","vip":1,"hat":"https://static.tigerbbs.com/f84d87792f02cf78e80ee34979fd31e5","crmLevel":7,"crmLevelSwitch":1,"idStr":"3574730309796268","authorIdStr":"3574730309796268"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962874425","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962828764,"gmtCreate":1669763598659,"gmtModify":1676538236623,"author":{"id":"3576260758860416","authorId":"3576260758860416","name":"andrew123","avatar":"https://community-static.tradeup.com/news/f2a1eaba26272212d42018e60e78b422","vip":1,"hat":"https://static.tigerbbs.com/4c5ceab71416b120bab4604c0754b52a","crmLevel":5,"crmLevelSwitch":0,"idStr":"3576260758860416","authorIdStr":"3576260758860416"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962828764","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962821453,"gmtCreate":1669763498572,"gmtModify":1676538236592,"author":{"id":"3583354852168828","authorId":"3583354852168828","name":"Calculator88","avatar":"https://static.tigerbbs.com/5a2c4088dca8986e0e57d7f1f47c11bc","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3583354852168828","authorIdStr":"3583354852168828"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962821453","repostId":1173876241,"repostType":2,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962821902,"gmtCreate":1669763466707,"gmtModify":1676538236570,"author":{"id":"4108816210230400","authorId":"4108816210230400","name":"YJ Lee","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"4108816210230400","authorIdStr":"4108816210230400"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962821902","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962860099,"gmtCreate":1669761972012,"gmtModify":1676538236221,"author":{"id":"3567067978989911","authorId":"3567067978989911","name":"Nichktan","avatar":"https://static.tigerbbs.com/73a93daf14236dfaeabaf3ea0b82fe4d","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3567067978989911","authorIdStr":"3567067978989911"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962860099","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962882062,"gmtCreate":1669761396056,"gmtModify":1676538236116,"author":{"id":"3572866150582582","authorId":"3572866150582582","name":"Darrenneoyo","avatar":"https://static.tigerbbs.com/19498d498955308da03ff537c16af7b0","vip":1,"hat":"https://static.tigerbbs.com/b0a2963eb37c60c5d6d4a8dbcd266952","crmLevel":5,"crmLevelSwitch":1,"idStr":"3572866150582582","authorIdStr":"3572866150582582"},"htmlText":"K","listText":"K","text":"K","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962882062","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962888758,"gmtCreate":1669761306274,"gmtModify":1676538236086,"author":{"id":"3582359360248748","authorId":"3582359360248748","name":"ML808","avatar":"https://static.tigerbbs.com/f601c68849ffbac8b7679f40f1471368","vip":1,"hat":"https://static.tigerbbs.com/7b75ce0c34afff716602792a5d0929dd","crmLevel":4,"crmLevelSwitch":0,"idStr":"3582359360248748","authorIdStr":"3582359360248748"},"htmlText":"Great&nbsp;","listText":"Great&nbsp;","text":"Great","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":6,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/9962888758","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105000388,"gmtCreate":1669761316889,"gmtModify":1669761329594,"authorId":3582359360248748,"author":{"id":3582359360248748,"idStr":"3582359360248748","authorId":3582359360248748,"name":"ML808","avatar":"https://static.tigerbbs.com/f601c68849ffbac8b7679f40f1471368","vip":1,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962888758,"type":1,"supId":0,"prevId":0,"content":"<u>yes</u>","text":"<u>yes</u>","html":"<u>yes</u>"}],"langContent":"EN"},{"id":9962888282,"gmtCreate":1669761273447,"gmtModify":1676538236078,"author":{"id":"3581551558648648","authorId":"3581551558648648","name":"Aurum","avatar":"https://static.tigerbbs.com/9b62b380c4f32358425ddfcfada4c880","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3581551558648648","authorIdStr":"3581551558648648"},"htmlText":"Pls like and comment","listText":"Pls like and comment","text":"Pls like and comment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":6,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962888282","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962888972,"gmtCreate":1669761174197,"gmtModify":1676538236051,"author":{"id":"4088114426953000","authorId":"4088114426953000","name":"小金钱袋","avatar":"https://static.tigerbbs.com/fcfe810767ab9edba4fd3048d353a712","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"4088114426953000","authorIdStr":"4088114426953000"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":7,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/9962888972","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105000478,"gmtCreate":1669761990178,"gmtModify":1669762003081,"authorId":3567067978989911,"author":{"id":3567067978989911,"idStr":"3567067978989911","authorId":3567067978989911,"name":"Nichktan","avatar":"https://static.tigerbbs.com/73a93daf14236dfaeabaf3ea0b82fe4d","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962888972,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">Okok</span>","text":"<span class=\"s1\">Okok</span>","html":"<span class=\"s1\">Okok</span>"}],"langContent":"EN"},{"id":9962880647,"gmtCreate":1669760641889,"gmtModify":1676538235949,"author":{"id":"3581837121803380","authorId":"3581837121803380","name":"ArcherWG","avatar":"https://community-static.tradeup.com/news/38e40c44fababa6849ceb15dfe8931a3","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3581837121803380","authorIdStr":"3581837121803380"},"htmlText":"Noted","listText":"Noted","text":"Noted","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9962880647","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962880161,"gmtCreate":1669760624353,"gmtModify":1676538235942,"author":{"id":"3553589672555235","authorId":"3553589672555235","name":"Ghtan","avatar":"https://static.tigerbbs.com/cc1760b696bc33ae7adab116832dab9e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3553589672555235","authorIdStr":"3553589672555235"},"htmlText":"Pls like&nbsp;","listText":"Pls like&nbsp;","text":"Pls like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":9,"commentSize":3,"repostSize":0,"link":"https://ttm.financial/post/9962880161","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105000400,"gmtCreate":1669761411499,"gmtModify":1669761424458,"authorId":3572866150582582,"author":{"id":3572866150582582,"idStr":"3572866150582582","authorId":3572866150582582,"name":"Darrenneoyo","avatar":"https://static.tigerbbs.com/19498d498955308da03ff537c16af7b0","vip":1,"currentWearingBadge":{"badgeId":"972123088c9646f7b6091ae0662215be-3","templateUuid":"972123088c9646f7b6091ae0662215be","name":"Legendary Trader","description":"Total number of securities or futures transactions reached 300","bigImgUrl":"https://static.tigerbbs.com/656db16598a0b8f21429e10d6c1cb033","smallImgUrl":"https://static.tigerbbs.com/03f10910d4dd9234f9b5702a3342193a","grayImgUrl":"https://static.tigerbbs.com/0c767e35268feb729d50d3fa9a386c5a","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2021.12.21","exceedPercentage":"93.17%","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1100},"crmLevel":5,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962880161,"type":1,"supId":105000315,"prevId":0,"content":"<u>okok</u>","text":"<u>okok</u>","html":"<u>okok</u>"},{"id":105000339,"gmtCreate":1669760829850,"gmtModify":1669760842860,"authorId":4087771638391430,"author":{"id":4087771638391430,"idStr":"4087771638391430","authorId":4087771638391430,"name":"Tanwl1","avatar":"https://static.tigerbbs.com/1763b1975bb18dbb1e545a65e8596923","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962880161,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">Ok</span>","text":"<span class=\"s1\">Ok</span>","html":"<span class=\"s1\">Ok</span>"},{"id":105000315,"gmtCreate":1669760664810,"gmtModify":1669760678410,"authorId":3581837121803380,"author":{"id":3581837121803380,"idStr":"3581837121803380","authorId":3581837121803380,"name":"ArcherWG","avatar":"https://community-static.tradeup.com/news/38e40c44fababa6849ceb15dfe8931a3","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962880161,"type":1,"supId":0,"prevId":0,"content":"[OK]","text":"[OK]","html":"[OK]"}],"langContent":"EN"},{"id":9962817356,"gmtCreate":1669760535275,"gmtModify":1676538235910,"author":{"id":"3581548490826504","authorId":"3581548490826504","name":"lfc","avatar":"https://static.tigerbbs.com/b4b2090d7d1e1d6aeaf607ff329136ac","vip":1,"crmLevel":7,"crmLevelSwitch":0,"idStr":"3581548490826504","authorIdStr":"3581548490826504"},"htmlText":"Please like&nbsp;","listText":"Please like&nbsp;","text":"Please like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":11,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/9962817356","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105000342,"gmtCreate":1669760864873,"gmtModify":1669760877771,"authorId":3574671095836888,"author":{"id":3574671095836888,"idStr":"3574671095836888","authorId":3574671095836888,"name":"HuGang3166","avatar":"https://static.tigerbbs.com/1eec1ffec53cf574f9f59bc64caabf88","vip":1,"crmLevel":3,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962817356,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">Ok</span>","text":"<span class=\"s1\">Ok</span>","html":"<span class=\"s1\">Ok</span>"}],"langContent":"EN"},{"id":9962814086,"gmtCreate":1669760365545,"gmtModify":1676538235878,"author":{"id":"3582865570179528","authorId":"3582865570179528","name":"JQ62","avatar":"https://static.tigerbbs.com/da715325270bb26fbcbce63e45f86a81","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3582865570179528","authorIdStr":"3582865570179528"},"htmlText":"Like&nbsp;","listText":"Like&nbsp;","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":6,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/9962814086","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105000317,"gmtCreate":1669760674139,"gmtModify":1669760684463,"authorId":4090418903913760,"author":{"id":4090418903913760,"idStr":"4090418903913760","authorId":4090418903913760,"name":"FatKid","avatar":"https://community-static.tradeup.com/news/f6692ab34697d0d2f7947fa3f34c6421","vip":1,"currentWearingBadge":{"badgeId":"7a9f168ff73447fe856ed6c938b61789-1","templateUuid":"7a9f168ff73447fe856ed6c938b61789","name":"Knowledgeable Investor","description":"Traded more than 10 stocks","bigImgUrl":"https://static.tigerbbs.com/e74cc24115c4fbae6154ec1b1041bf47","smallImgUrl":"https://static.tigerbbs.com/d48265cbfd97c57f9048db29f22227b0","grayImgUrl":"https://static.tigerbbs.com/76c6d6898b073c77e1c537ebe9ac1c57","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2023.07.14","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1102},"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962814086,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">K</span>","text":"<span class=\"s1\">K</span>","html":"<span class=\"s1\">K</span>"}],"langContent":"EN"},{"id":9962816262,"gmtCreate":1669760113156,"gmtModify":1676538235812,"author":{"id":"3581739666390904","authorId":"3581739666390904","name":"ArcticFox88","avatar":"https://static.tigerbbs.com/cb1f244ecf651567e5baa7863d330262","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3581739666390904","authorIdStr":"3581739666390904"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":8,"commentSize":6,"repostSize":0,"link":"https://ttm.financial/post/9962816262","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about 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23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9962816328,"gmtCreate":1669760045965,"gmtModify":1676538235799,"author":{"id":"3585385530619181","authorId":"3585385530619181","name":"h20_mako","avatar":"https://static.tigerbbs.com/815dd8430435288774e9be0c03637f83","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3585385530619181","authorIdStr":"3585385530619181"},"htmlText":"🤔","listText":"🤔","text":"🤔","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":9,"commentSize":3,"repostSize":0,"link":"https://ttm.financial/post/9962816328","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105000199,"gmtCreate":1669760385404,"gmtModify":1669760398777,"authorId":3581493418385518,"author":{"id":3581493418385518,"idStr":"3581493418385518","authorId":3581493418385518,"name":"AlexNg79","avatar":"https://static.tigerbbs.com/5e9e0d28b983da9e01b0daab20eb62ba","vip":1,"currentWearingBadge":{"badgeId":"972123088c9646f7b6091ae0662215be-3","templateUuid":"972123088c9646f7b6091ae0662215be","name":"Legendary Trader","description":"Total number of securities or futures transactions reached 300","bigImgUrl":"https://static.tigerbbs.com/656db16598a0b8f21429e10d6c1cb033","smallImgUrl":"https://static.tigerbbs.com/03f10910d4dd9234f9b5702a3342193a","grayImgUrl":"https://static.tigerbbs.com/0c767e35268feb729d50d3fa9a386c5a","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2021.12.21","exceedPercentage":"93.82%","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1100},"crmLevel":5,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962816328,"type":1,"supId":105000159,"prevId":0,"content":"<u>k</u>","text":"<u>k</u>","html":"<u>k</u>"},{"id":105000180,"gmtCreate":1669760278173,"gmtModify":1669760290928,"authorId":3586987359612845,"author":{"id":3586987359612845,"idStr":"3586987359612845","authorId":3586987359612845,"name":"yingyingzoe","avatar":"https://static.tigerbbs.com/0334d7b658efcee4f8a876775ab43fd8","vip":1,"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962816328,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">K</span>","text":"<span class=\"s1\">K</span>","html":"<span class=\"s1\">K</span>"},{"id":105000159,"gmtCreate":1669760053357,"gmtModify":1669760066378,"authorId":3585385530619181,"author":{"id":3585385530619181,"idStr":"3585385530619181","authorId":3585385530619181,"name":"h20_mako","avatar":"https://static.tigerbbs.com/815dd8430435288774e9be0c03637f83","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962816328,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">👍</span>","text":"<span class=\"s1\">👍</span>","html":"<span class=\"s1\">👍</span>"}],"langContent":"EN"},{"id":9962811738,"gmtCreate":1669759886225,"gmtModify":1676538235768,"author":{"id":"3579315453167562","authorId":"3579315453167562","name":"Bull888","avatar":"https://static.tigerbbs.com/ed0dd70f3590d98b041e28374466e9d3","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3579315453167562","authorIdStr":"3579315453167562"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":8,"commentSize":2,"repostSize":0,"link":"https://ttm.financial/post/9962811738","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105000383,"gmtCreate":1669761255777,"gmtModify":1669761268635,"authorId":4099796716910130,"author":{"id":4099796716910130,"idStr":"4099796716910130","authorId":4099796716910130,"name":"Sunday128","avatar":"https://static.tigerbbs.com/f2cc38fb8b7ce0ae876f3a7b6154dfe0","vip":1,"currentWearingBadge":{"badgeId":"972123088c9646f7b6091ae0662215be-1","templateUuid":"972123088c9646f7b6091ae0662215be","name":"Elite Trader","description":"Total number of securities or futures transactions reached 30","bigImgUrl":"https://static.tigerbbs.com/ab0f87127c854ce3191a752d57b46edc","smallImgUrl":"https://static.tigerbbs.com/c9835ce48b8c8743566d344ac7a7ba8c","grayImgUrl":"https://static.tigerbbs.com/76754b53ce7a90019f132c1d2fbc698f","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2024.02.05","exceedPercentage":"60.74%","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1100},"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962811738,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">Ok</span>","text":"<span class=\"s1\">Ok</span>","html":"<span class=\"s1\">Ok</span>"},{"id":105000140,"gmtCreate":1669759893564,"gmtModify":1669759906801,"authorId":3579315453167562,"author":{"id":3579315453167562,"idStr":"3579315453167562","authorId":3579315453167562,"name":"Bull888","avatar":"https://static.tigerbbs.com/ed0dd70f3590d98b041e28374466e9d3","vip":1,"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962811738,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">Ok</span>","text":"<span class=\"s1\">Ok</span>","html":"<span class=\"s1\">Ok</span>"}],"langContent":"EN"},{"id":9962819147,"gmtCreate":1669759451189,"gmtModify":1676538235699,"author":{"id":"4103929380960260","authorId":"4103929380960260","name":"RPGold","avatar":"https://static.itradeup.com/news/7b411b17585df3db54c94d5ebe3e8ce3","vip":1,"crmLevel":2,"crmLevelSwitch":1,"idStr":"4103929380960260","authorIdStr":"4103929380960260"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":10,"commentSize":3,"repostSize":1,"link":"https://ttm.financial/post/9962819147","repostId":1173876241,"repostType":4,"repost":{"id":"1173876241","kind":"news","pubTimestamp":1669735462,"share":"https://ttm.financial/m/news/1173876241?lang=&edition=fundamental","pubTime":"2022-11-29 23:24","market":"us","language":"en","title":"Alibaba: Candidate For The Record Book Of Mispriced Stocks","url":"https://stock-news.laohu8.com/highlight/detail?id=1173876241","media":"Seeking Alpha","summary":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings","content":"<html><head></head><body><p>Summary</p><ul><li>While top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.</li><li>Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.</li><li>Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.</li></ul><p>I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.</p><p>However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.</p><h3>Quarterly Results</h3><p>About two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.</p><p>Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.</p><p><img src=\"https://static.tigerbbs.com/78baaf1cc15acbf0419b0de8a14fb12b\" tg-width=\"640\" tg-height=\"359\" referrerpolicy=\"no-referrer\"/>When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.</p><p><img src=\"https://static.tigerbbs.com/2e016228f4be40a684f90dd4cc0d784a\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:</p><p>During our recent 11.11 Global Shopping Festival, Taobao and Tmall&#39;s total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.</p><p>Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.</p><h3>Headwinds</h3><p>While Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:</p><p>We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.</p><p>And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.</p><h3><img src=\"https://static.tigerbbs.com/e5809b3db2fbbe959366e7e5747713f2\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>Long-Term Growth</h3><p>Growth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.</p><p><img src=\"https://static.tigerbbs.com/8dbac2dcf4e4f48e3d631c3a9120bab3\" tg-width=\"640\" tg-height=\"297\" referrerpolicy=\"no-referrer\"/>The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:</p><p>To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.</p><p>But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.</p><p><img src=\"https://static.tigerbbs.com/baff5be28b9b9bfc4dfdd1e92c109996\" tg-width=\"640\" tg-height=\"451\" referrerpolicy=\"no-referrer\"/>In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).</p><p><img src=\"https://static.tigerbbs.com/92ae88cd63f9723d8ed8ec370eebccf7\" tg-width=\"640\" tg-height=\"361\" referrerpolicy=\"no-referrer\"/>And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.</p><p><img src=\"https://static.tigerbbs.com/2f02c27b7c2c4f411e620779d9dfe359\" tg-width=\"640\" tg-height=\"507\" referrerpolicy=\"no-referrer\"/>International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.</p><p>And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:</p><p>After many years of operation, Taobao, Tmall is now deeply entrenched in our users&#39; mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)</p><p>Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.</p><p>Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.</p><p>Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.</p><h3>Share Repurchases</h3><p>In the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.</p><p><img src=\"https://static.tigerbbs.com/0af5c02ed6507d0f66fc07aaed807035\" tg-width=\"635\" tg-height=\"435\" referrerpolicy=\"no-referrer\"/>And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).</p><h3>Intrinsic Value Calculation</h3><p>In every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.</p><p>In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.</p><p>And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.</p><p><img src=\"https://static.tigerbbs.com/66d4ee3047c7afdae4d9e6591ea506f8\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.</p><h3>Conclusion</h3><p>I know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.</p></body></html>","source":"seekingalpha","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: Candidate For The Record Book Of Mispriced Stocks</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: Candidate For The Record Book Of Mispriced Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-11-29 23:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for ...</p>\n\n<a href=\"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks\">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-W"},"source_url":"https://seekingalpha.com/article/4561046-alibaba-candidate-for-the-record-book-of-mispriced-stocks","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1173876241","content_text":"SummaryWhile top line growth is now close to zero, Alibaba could increase operating income, earnings per share, and free cash flow at a high pace.Despite different risks continuing to exist for Alibaba, the growth potential for the different business segments remains high.Alibaba is focusing on share buybacks, which is a good move considering its deeply undervalued share price.I must be honest. So far, my investment in as well as my articles about Alibaba Group Holding Limited (NYSE:BABA) have been nothing but a catastrophe. Since my last article, the stock price declined 31% and since the article in January 2022, the stock declined 37%. I built my position in Alibaba over time but so far, I didn’t make any money. I also must admit that I did not expect Alibaba to decline so steeply. At least when getting close to $100, I assumed we hit the bottom and could not imagine Alibaba declining lower.However, my long-term investment thesis did not change. I am still long-term bullish about Alibaba and in my opinion the market is completely mispricing the stock and just focusing on the risks while completely ignoring the cash generating business and existing growth potential.Quarterly ResultsAbout two weeks ago, Alibaba reported second quarter results for fiscal 2022. And while it missed on revenue expectations by $490 million, it could beat earnings per ADS by $0.17. When looking at the quarterly results, I will report the numbers in Renminbi.Although growth slowed down, Alibaba could still increase revenue from RMB 200,690 million in the same quarter last year to RMB 207,176 million this quarter resulting in 3.2% year-over-year growth. Adjusted EBITDA increased from RMB 34,840 million in Q2/21 to RMB 43,311 million in Q2/22 – resulting in 24.3% year-over-year growth. And finally, diluted earnings per share almost quadrupled from RMB 0.25 in the same quarter last year to RMB 0.97 this quarter. When looking at non-GAAP diluted earnings per share, we saw an increase of 15% YoY from RMB 1.40 in the same quarter last year to RMB 1.61 this quarter. And finally, free cash flow increased from RMB 22,239 million in Q2/21 to RMB 35,709 million in Q2/22 – resulting in 60.6% year-over-year growth.When looking at the different segments, the biggest part of revenue is still stemming from China commerce, which generated RMB 135,431 million in revenue (a decline of 1% year-over-year). This segment is responsible for the biggest part of adjusted EBITDA (RMB 43,980 million). International Commerce could generate RMB 15,747 million in revenue, resulting in 4% YoY growth and Local Consumer Services generated revenue of RMB 13,073 million resulting in 21% YoY growth. However, both segments are still not profitable and generated negative EBITDA. Cloud could generate RMB 20,757 million in revenue (increasing 4% year-over-year growth) and adjusted EBITDA was RMB 434 million. Cainiao could generate revenue of RMB 13,367 million resulting in 36% year-over-year growth and after reporting a loss of in the same quarter last year the segment reported an adjusted EBITDA of RMB 125 million. And finally, Digital media and entertainment could generate RMB 8,392 million in revenue (resulting in 4% YoY growth). However, the segment was also not profitable.Additionally, growth from its 11.11 Global Shopping Event slowed down as well and Alibaba could only report results in line with last year’s gross merchandise volume performance. During the last earnings call, Alibaba also commented on the last Singles Day:During our recent 11.11 Global Shopping Festival, Taobao and Tmall's total GMV was in line with the performance last year during the same period. Initial fruits of the operation strategies outlined just now were seen during November 11. More than 600 million users engaged with our November 11 related contents, a single-digit growth year-on-year. Although, the total number of buyers declined compared to the same period last year, the average GMV per person increased.Management also mentioned three factors which had a negative impact on the results. First, the warmer than usual temperature in China probably led to fewer people shopping online. Second, about 15% of delivery areas across China experienced abnormal or suspended logistic services, which had a negative effect. And finally, other merchants were also pushing hard on 11.11 and probably took away some market share from Alibaba.HeadwindsWhile Alibaba is talking about a solid quarter, they are also acknowledging the difficulties for Alibaba during the last earnings call:We delivered a solid quarter in a macro environment full of uncertainty. The ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation, the convergence of all these forces that created considerable difficulties for business operations.And one of the major problems in China is still COVID-19. Right now, numbers are increasing dramatically again – and we must assume this will have a negative impact on Alibaba in the current quarter as it creates huge challenges for logistics.Long-Term GrowthGrowth for Alibaba is clearly slowing down right now - as it does for almost every technology company around the world. As we must assume the low growth rates (or even declining numbers) will last for several quarters (maybe even a few years) this is a temporary headwind due to the economy slowing down and the looming recession. Nevertheless, I remain confident that the long-term outlook should be bullish, and Alibaba’s management is also optimistic about the growth potential of the different business sectors.The highest growth rates might be achieved by the cloud business, where Alibaba is clear market leader in China. In 2021, Alibaba had a market share of 37% ahead of competitors Huawei – which has a market share of 18% - and Tencent (OTCPK:TCEHY) – which has a market share of 17%. And while I don’t think Alibaba will be able to gain market shares (as other, strong competitors are moving in the space), the public cloud market is expected to triple in the coming years – and Alibaba can achieve high growth rates by just keeping its market share stable. In a study about the Chinese cloud market, McKinsey writes:To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. (…) Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors.But not only the cloud business of Alibaba can grow at a high pace. Its China commerce business, which is generating most of Alibaba’s revenue and responsible for its profitability, also has growth potential going forward – despite the declining Chinese population. While the population is declining, the share of Chinese population living in poverty is also declining. And I am already using the definitions of poverty adopted in upper-middle-income countries. In 2019, about 25% of population still lived in poverty in China (in urban areas only 16%). And with that percentage continuing to go down, the number of potential shoppers for Alibaba will increase.In my last article about JD.com, Inc., I already mentioned that Chinese consumers are expected to shop more online in the years to come. According to an Accenture study about Chinese consumer insights, most people will either keep their personal frequency of online shopping unchanged (49%) or increase the frequency of online shopping (44%).And the same study is also showing that the per capita disposable income of urban residents is continuously increasing during the last decade. And even when per capita consumption expenditures declined slightly in 2020 (due to COVID-19), this number is also increasing with a steady pace.International Commerce is also expected to grow with a high pace. Alibaba is focusing on the South Asia e-commerce market, which is expected to grow with a high pace. The market size will increase with a CAGR of 27% between 2020 and 2025 to $260 billion (according to Alibaba’s Investor Day 2021 presentation). And Lazada is not only well-positioned, but it also continued to improve monetization rate and was also enhancing operating efficiency. Additionally, during the last quarter, loss per order for Lazada narrowed by 25% compared to the same quarter last year. And the International commerce segment is close to being profitable.And finally, we should not forget the economic moat Alibaba has built around its business. During the last earnings call, management made the following statement:After many years of operation, Taobao, Tmall is now deeply entrenched in our users' mind as the shopping destination. We are focused on user engagement on our platform by enhancing the customer journey across search, algorithm-driven discovery recommendations, live streaming and other engagement features (…)Number two, we further consolidate the scale and the stickiness of our most valuable consumer group. For the 12 months ended December 30, 2022, the number of consumers who each spent over RMB 10,000 on top on Taobao and Tmall remain around 124 million with a retention rate of 98%. 88VIP membership population held steady at 25 million this quarter, with solid membership retention and growth in GMV contribution.Number three, we improved consumer satisfaction by continually investing in customer service during and after services and the logistics service experiences, such as doorstep delivery of orders as required.Alibaba clearly has a wide economic moat based on cost advantages – the company is one of the major e-commerce players in China and the cost advantages are hard to match by smaller competitors. Aside from cost advantages, Alibaba is also profiting from its brand name(s) and for its cloud business switching costs come into play. After choosing a cloud service it usually costs time and money (which businesses are not willing to spend) to move to a competitor – and this is creating a stickiness in favor of Alibaba.Share RepurchasesIn the last few quarters, Alibaba increased its share repurchase program, which was certainly a good move by Alibaba considering the steeply declining share price. Since June 2021 (15 months ago), the number of outstanding shares was decreased from 2,755 million to 2,646 million right now – resulting in a decline of 4%.And it is good that Alibaba is buying back shares and the remaining $7 billion share repurchase program was extended by another $15 billion. But in my opinion, they should be more aggressive and use the cash reserves for share buybacks – at least in parts. On September 30, 2022, the company had RMB 206.7 billion in cash and cash equivalents as well as RMB 270.2 billion in short-term investments. At current share prices, the company could repurchase 32% of its outstanding shares and Alibaba should certainly not use all its liquid resources for share buybacks. But using cash to repurchase about 10% of outstanding shares would be a smart move in my opinion. Additionally, Alibaba is generating enough free cash flow annually to repurchase more than 10% of the outstanding shares (of course this will change with a higher share price).Intrinsic Value CalculationIn every single one of my articles, I basically argued that Alibaba is undervalued. And I will stick to my guns – the company is undervalued and remains undervalued. Even when calculating with extremely cautious assumptions, Alibaba is clearly trading below its intrinsic value.In the last two quarters, Alibaba generated a free cash flow of $8,137 million and in the last annual results the company reported a free cash flow of $15,597 million. As basis for our calculation, we therefore assume a free cash flow of $16 billion. And for the years to come, we assume 6% growth till perpetuity which leads to an intrinsic value of $151.23 for Alibaba.And – like I said above – theses assumptions are extremely cautious. Not only did Alibaba report already much higher free cash flow numbers in the past (as high as $26 billion), it also reported much higher growth rates in the past. And for the years to come there are several growth drivers: First, Alibaba will be able to grow its top line again (see section above). Second, despite constantly declining margins in the past, the business will at some point be able to reduce the current high spendings on expansions and be more profitable again. And finally, Alibaba can use share buybacks (especially right now) and spend its cash on the balance sheet as well as the generated free cash flow to repurchase shares. This by itself is enough to lead to 6% growth right now.And finally, we should not forget, that Alibaba is trading for a P/FCF ratio of 8.7 right now – although free cash flow declined almost 50% compared to previous levels. These are absurd valuation levels for a business as Alibaba – despite risks surrounding the business.ConclusionI know I have been wrong about Alibaba in the last few quarters. But first of all, the horrible stock performance of the last few quarters does not mean my thesis – which is based on the fundamentals of the business – is wrong. And second, investing is a marathon and not a sprint. I remain extremely bullish about Alibaba.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":105000374,"gmtCreate":1669761091672,"gmtModify":1669761105022,"authorId":3567166157226906,"author":{"id":3567166157226906,"idStr":"3567166157226906","authorId":3567166157226906,"name":"imteng87","avatar":"https://static.tigerbbs.com/85b7b030b8b0786177d474964394bab4","vip":1,"currentWearingBadge":{"badgeId":"44212b71d0be4ec88898348dbe882e03-1","templateUuid":"44212b71d0be4ec88898348dbe882e03","name":"Boss Tiger","description":"The transaction amount of the securities account reaches $100,000","bigImgUrl":"https://static.tigerbbs.com/c8dfc27c1ee0e25db1c93e9d0b641101","smallImgUrl":"https://static.tigerbbs.com/f43908c142f8a33c78f5bdf0e2897488","grayImgUrl":"https://static.tigerbbs.com/82165ff19cb8a786e8919f92acee5213","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2023.07.14","exceedPercentage":"60.02%","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1101},"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962819147,"type":1,"supId":0,"prevId":0,"content":"<p>ok</p>","text":"<p>ok</p>","html":"<p>ok</p>"},{"id":105000117,"gmtCreate":1669759693184,"gmtModify":1669759705890,"authorId":4113646398298622,"author":{"id":4113646398298622,"idStr":"4113646398298622","authorId":4113646398298622,"name":"xinxino","avatar":"https://community-static.tradeup.com/news/48bdb4fe291ddcf6f54b11be84bf4dfd","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962819147,"type":1,"supId":0,"prevId":0,"content":"<u>Ok</u>","text":"<u>Ok</u>","html":"<u>Ok</u>"},{"id":105000093,"gmtCreate":1669759472399,"gmtModify":1669759485844,"authorId":3577078420999059,"author":{"id":3577078420999059,"idStr":"3577078420999059","authorId":3577078420999059,"name":"Chloeyeo","avatar":"https://static.tigerbbs.com/c0640230dfe63a2ae4b136fc5bfc6d62","vip":1,"currentWearingBadge":{"badgeId":"1026c425416b44e0aac28c11a0848493-2","templateUuid":"1026c425416b44e0aac28c11a0848493","name":"Senior Tiger","description":"Join the tiger community for 1000 days","bigImgUrl":"https://static.tigerbbs.com/0063fb68ea29c9ae6858c58630e182d5","smallImgUrl":"https://static.tigerbbs.com/96c699a93be4214d4b49aea6a5a5d1a4","grayImgUrl":"https://static.tigerbbs.com/35b0e542a9ff77046ed69ef602bc105d","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2023.11.20","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1001},"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9962819147,"type":1,"supId":0,"prevId":0,"content":"<span class=\"s1\">Nice</span>","text":"<span class=\"s1\">Nice</span>","html":"<span class=\"s1\">Nice</span>"}],"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":427,"commentSize":79,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false}}