Alibaba: When Will The Sentiment Turn Around?

Seeking Alpha02-22

Alibaba stock has experienced a steep decline, losing as much as 81.83% and currently down 77%.The Chinese economy is slow, but an acceleration would greatly benefit Alibaba. This could cause ...

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neo26000
·02-22
...when Jolin Tsai starts buying as well...
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ninjainvest
·02-22
how long have u waited for it to turnaround? It wont turn around already, not in the near future.
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This could cause ...</p>\n\n<a href=\"https://seekingalpha.com/article/4671874-alibaba-when-will-the-sentiment-turn-around\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0127658192.USD","symbol_name":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4671874-alibaba-when-will-the-sentiment-turn-around","article_id":"2413285454","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2413285454","pubTimestamp":1708572600,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"In this paragraph, we will take a look at some of the key financial metrics and compare them to other e-commerce players.Let's get this out of the way first. Alibaba is cheap, very cheap. 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This could cause significant multiple expansion and as such a swift increase in the stock price.Alibaba is cheap compared to other e-commerce players, with impressive financial metrics and multiples.It might be wise to wait for a technical breakout to get the best possible risk/reward opportunity.We believe Alibaba is a strong buy as the underlying value is simply too big to ignore.Bloomberg/Bloomberg via Getty ImagesIntroductionThe last time we wrote about Alibaba (NYSE:BABA) was almost a year ago. In this article, we will take a deeper look at what changed and why we remain bullish.Alibaba was once a beloved investment for growth and value investors all over the world. In more recent years, the company hasn't received much love. The disappearance of Jack Ma, regulation fears, trade war fears, and even geopolitical fears with the possible scenario of China invading Taiwan.In my opinion, the risks associated with China were grossly underestimated in the crazy market hausse we saw in 2020-2021. Since then, the stock has been in a steep downtrend losing as much as 81.83% at one point and currently still down a staggering 77%.Nevertheless, it is important to remember that the Chinese economy as a whole is pretty slow right now. The whole Shanghai index has been on a decline since early 2021.This has multiple reasons, the Chinese economy still hasn't recovered from the COVID-19 lockdowns. That the Chinese economy is slow can be seen in both the CPI and the manufacturing index. The CPI is even showing signs of deflation at this moment in time.This is the main reason why Alibaba hasn't been able to recover since our last write-up. Nevertheless, we indicated that Alibaba is a long-term play and one shouldn't expect immediate results from this stock. At the current valuation, Alibaba is simply too cheap to ignore, but I would wait for the sentiment to turn before buying into the stock for the optimal risk/reward.YchartsLet's compare this price evolution to its most well-known American competitor, Amazon (AMZN). Alibaba stock topped on the 27th of October 2020 at almost $320 per share. Since January 2020, Amazon had a return of 110.7%, while Alibaba returned -56.41%. Not what you like to see if you are a BABA investor.YchartsOverall, this slow period in the Chinese economy is further fuel to our bull case as an acceleration of the Chinese economy will significantly benefit Alibaba. Furthermore, we believe the depressed economy by far outweighs the potential geopolitical risk at this moment in time. The likelihood of China invading Taiwan remains relatively low in the near future.Is It Cheap Enough?In this paragraph, we will take a look at some of the key financial metrics and compare them to other e-commerce players.Let's get this out of the way first. Alibaba is cheap, very cheap. Nonetheless, it isn't getting any love from investors, what's the reason behind this, you might ask, we will take a look at this in the next paragraph, but first let's take a look at the revenue and gross profit growth.As can be seen in the chart below, Alibaba's revenue has soared till 2022, where it peaked at $134,539.60M, gross profit peaked as well, at $49,578.40M. But, if you take a close look at the chart, you can see that the gross profit is almost back at the same level with the TTM gross profit currently sitting at $49,578.40M.Stock InfoNow, let's take a look at the CAGRs. The revenue CAGR since 2015 is 29.57%, while the gross profit CAGR since 2015 is close to 21%. Very impressive numbers to say the least. While the revenue and gross profit have gone nowhere since 2022, the 5Y CAGRs are still 17.64% and 12.61% respectively for revenue and gross profit. It's not as great, but still very solid.In addition, the gross margin is going back in the right direction again as well, with the TTM gross margin sitting at 37.91% up from 36.85% in both 2022 and 2023.An important thing to note is where this revenue is coming from. In the table below, you can see that by far the biggest contributor to its revenue is the China Commerce Retail segment, contributing 63% of the total revenue.What is interesting to note is that Alibaba seems to have focused more on profitability over the last year. Of the 6 largest revenue drivers, all are posting a positive EBITDA this quarter. This is in stark contrast to the same quarter last year, where 4 out of 6 still posted negative EBITDA numbers.What is interesting to see is that Alibaba's revenue has now become a bit more diversified compared to when we last wrote about it is a positive sign. Nevertheless, China Commerce Retail remains the one to watch, China Commerce Retail includes Taobao and Tmall, the national eCommerce platforms.It is pretty clear that this is Alibaba's bread and butter of Alibaba's bottom line.Stock InfoTaobao and TmallTaobao, launched in 2003, is a C2C marketplace, it has been widely adopted in China and competes with JD.com (JD). Taobao is focused on selling a wide variety of products at a very low price. Volume is thus crucial to generate a significant amount of cash.On the other hand, you have Tmall which was previously a subdivision of Taobao. Tmall is now an independent division focused on B2C eCommerce that focuses on the quality of merchants by implementing authorization checks. This increases the credibility of the merchants.Both platforms are intertwined as the large logistics network from Taobao is used by Tmall as well, as the large volume going through requires significant logistics infrastructure to ensure seamless delivery.Gross Merchandise Value (GMV) of Taobao and Tmall is $616.8B and $597.0B, respectively. In comparison, Amazon generated $692.8B in GMV in 2022. Competitors like Pinduoduo and JD.com had a GMV of $541.4B and $570.1B, respectively.Some Other MetricsNow let's take a look at some other metrics, in 2023 Alibaba generated over $24B in FCF. Nevertheless, it is important to take into consideration that Alibaba pays out a significant amount of stock-based compensation (SBC). 25% of the FCF goes to stock-based compensation, which is quite a significant portion for a company that isn't in its hyper-growth stage anymore.In addition, the company has $86.56B in Total Cash & ST Investments on its balance sheet. With the current share price, this means the company is trading at just 2.13x its cash and ST equivalents. This is mind-boggling for a company like Alibaba.Let's look a little bit further at some multiples.The price to FCF and the PS ratio are both at the lowest point in history.YchartsWith the current FCF of over $24B, it currently has an FCF Yield of 13.1%, according to SA this is even higher with 14.53% at the moment of writing. Again, do note that 1/4th of this FCF goes to SBC.Furthermore, Alibaba is the cheapest Mega Cap tech stock there is out there. Let's take a look at the EV/EBITDA multiple of Alibaba compared to some of the giants in the industry. In addition, we added MercadoLibre as this is a peer in an emerging market, which makes it a good comparison. We wrote an article about this stellar company as well, which you can check out here.In this comparison, we used Pinduoduo (PDD), Tencent (OTCPK:TCEHY), MercadoLibre (MELI), Alphabet (GOOGL), Microsoft (MSFT), Amazon, Nvidia (NVDA), and Apple (AAPL). You can see Alibaba is the cheapest by quite a large margin.YchartsValuationNow that we have discussed some of the metrics, let's take a quick look at some possible valuation scenarios for the next few years. While a DCF remains the most accurate way to value a company, it still has quite a decent amount of flaws. Normally, a reverse DCF would be my preferred method to look at companies, but I think a P/FCF valuation study is actually pretty interesting for Alibaba, currently.Alibaba is currently growing at a steady pace, with a 5Y free cash flow CAGR of 11%, for this example, we will take a much more conservative FCF growth of just 6%. The current P/FCF is around 6.9x, we believe this is very close to the bear case for the company. As such, we decided to put P/FCF for the bear case at 6.5x. Further assumptions in this model are a decrease in shares outstanding of 2.50% per year (the last 2 years this was 3%+).As you can see, these metrics are quite conservative, but when looking at Alibaba over the last 2 years, being conservative seems like the right way to go.Stock InfoAs you can see, if BABA's sentiment even remotely improves the stock price could quickly soar, even in our base case the valuation for 2025 is as much as $135.06, which is almost double its current share price.If BABA would go back to P/FCF's valuation of the pre-COVID-19 era, we would already be sitting in the super bull case, so even that scenario isn't necessarily super extreme in case Alibaba can go back to its former glory.The Risks Are Still ThereWhile Alibaba stock is cheap, the risks we talked about in our last article, which we wrote almost a year ago, are still there.It is pretty simple: if Alibaba were located in Europe or in the United States, the company would deserve a much higher multiple. Due to Alibaba being headquartered in China, the company has to work under the influence. A lot of us still remember the \"Big Tech Crackdown\". What exactly is/was the \"Big Tech Crackdown\"?It can be best described as \" measures such as antitrust probes, data security overhauls, and a check on capitalist \"excess.\" These measures have targeted a wide range of sectors and have been carried out by various agencies, with varying justifications.\" This wiped out over a trillion dollars in value of Chinese companies. The reason for this has never been clearly communicated, but it is fair to assume that the CCP wanted to show its power and lower the power of the big tech companies in China. If you want to learn more about all the risks associated with Alibaba, we recommend reading our prior article on Alibaba.Recent EarningsAlibaba reported earnings last week, they beat revenue by $270M and EPS by $0.03. While this looks pretty good at first glance, it must be said that they weren't great. Revenue grew by 5.1% year over year, nowhere close to the growth they had in previous years, but this is already baked in the stock price, in my opinion.More worrisome is the income from operations. Operating income has declined over the last 3 quarters. In addition, it is now lower than the same quarter last year, $4.367B versus $5.473B in the year prior. This is a 20% decline in just a year. In addition, interest expense went up from $225M the year prior to $300M.Earlier in the article, we showed a chart with the segment revenue. As you saw, China Commerce Retail is by far the biggest segment. Unfortunately, the Chinese economy isn't doing too well at this moment in time, which is weighted on Alibaba's results. In addition, this might hurt Alibaba for a while longer, although there are signs of improvement in China.International commerce, on the other hand, showed strong growth, revenue for the segment came in at $4B, an increase of 44 year-over-year.All in all, not much has changed for Alibaba, the only thing that happened over the last year is that the stock continued to decline.Nonetheless, the company announced increased buybacks of an additional $25B. Furthermore, they announced that they will start paying a $1 yearly dividend or a dividend yield of 1.35%, which might attract dividend investors.Another good sign we saw was both Joe Tsai and Jack Ma buying stock starting in Q3 throughout the end of the year. Insider buying is always a good sign, as insiders only buy for one reason, they believe the stock is going up.ConclusionWe believe Alibaba is a solid value play. The stock is still in a steep downtrend and it would be wise to wait for a breakout on the chart for the best risk/reward opportunity. Nevertheless, if you can stomach the volatility and have a long time horizon, a small position in Alibaba could be a great addition to your portfolio.Nonetheless, there still are significant risks and a discount on the stock will always exist due to all the risks associated with holding a Chinese company. But, if the sentiment improves once again, we could quickly see multiple expansion on Alibaba and the stock price is likely to go much higher from here.Alibaba might have a few more tough quarters, but it is still a powerhouse in e-commerce and is growing its other segments at a solid pace. As such, I believe the worst for the company is already behind us, if this is the case for the stock, I have to be honest and I have no idea. The stock has been very cheap for a while and might continue to stay cheap for some time.Nevertheless, we will still rate Alibaba as a strong buy as it is simply too cheap to ignore and the risk/reward is simply too exciting to ignore.","kind":"highlight","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":0},"commentList":[{"id":276681453338704,"gmtCreate":1708579454417,"gmtModify":1708579459023,"author":{"id":"4131703342800552","authorId":"4131703342800552","name":"neo26000","avatar":"https://community-static.tradeup.com/news/11d50ec0d6202770a8629aa7f06a5d4f","vip":1,"hat":"https://static.tigerbbs.com/4c5ceab71416b120bab4604c0754b52a","crmLevel":9,"crmLevelSwitch":1,"idStr":"4131703342800552","authorIdStr":"4131703342800552"},"htmlText":"...when Jolin Tsai starts buying as well...","listText":"...when Jolin Tsai starts buying as well...","text":"...when Jolin Tsai starts buying as well...","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/276681453338704","repostId":2413285454,"repostType":4,"repost":{"id":"2413285454","kind":"highlight","pubTimestamp":1708572600,"share":"https://ttm.financial/m/news/2413285454?lang=&edition=fundamental","pubTime":"2024-02-22 11:30","market":"hk","language":"en","title":"Alibaba: When Will The Sentiment Turn Around?","url":"https://stock-news.laohu8.com/highlight/detail?id=2413285454","media":"Seeking Alpha","summary":"In this paragraph, we will take a look at some of the key financial metrics and compare them to other e-commerce players.Let's get this out of the way first. Alibaba is cheap, very cheap. N","content":"<html><head></head><body><ul style=\"\"><li><p>Alibaba stock has experienced a steep decline, losing as much as 81.83% and currently down 77%.</p></li><li><p>The Chinese economy is slow, but an acceleration would greatly benefit Alibaba. This could cause significant multiple expansion and as such a swift increase in the stock price.</p></li><li><p>Alibaba is cheap compared to other e-commerce players, with impressive financial metrics and multiples.</p></li><li><p>It might be wise to wait for a technical breakout to get the best possible risk/reward opportunity.</p></li><li><p>We believe Alibaba is a strong buy as the underlying value is simply too big to ignore.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/2cdf92b7af42e3d9039fc082a2fe740c\" alt=\"Bloomberg/Bloomberg via Getty Images\" title=\"Bloomberg/Bloomberg via Getty Images\" tg-width=\"594\" tg-height=\"396\"/><span>Bloomberg/Bloomberg via Getty Images</span></p><h2 id=\"id_557719550\">Introduction</h2><p>The last time we wrote about Alibaba (NYSE:BABA) was almost a year ago. In this article, we will take a deeper look at what changed and why we remain bullish.</p><p>Alibaba was once a beloved investment for growth and value investors all over the world. In more recent years, the company hasn&#39;t received much love. The disappearance of Jack Ma, regulation fears, trade war fears, and even geopolitical fears with the possible scenario of China invading Taiwan.</p><p>In my opinion, the risks associated with China were grossly underestimated in the crazy market hausse we saw in 2020-2021. Since then, the stock has been in a steep downtrend losing as much as 81.83% at one point and currently still down a staggering 77%.</p><p>Nevertheless, it is important to remember that the Chinese economy as a whole is pretty slow right now. The whole Shanghai index has been on a decline since early 2021.</p><p>This has multiple reasons, the Chinese economy still hasn&#39;t recovered from the COVID-19 lockdowns. That the Chinese economy is slow can be seen in both the CPI and the manufacturing index. The CPI is even showing signs of deflation at this moment in time.</p><p>This is the main reason why Alibaba hasn&#39;t been able to recover since our last write-up. Nevertheless, we indicated that Alibaba is a long-term play and one shouldn&#39;t expect immediate results from this stock. At the current valuation, Alibaba is simply too cheap to ignore, but I would wait for the sentiment to turn before buying into the stock for the optimal risk/reward.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/536029bc5d59f97c7e158e3508f97d87\" alt=\"Ycharts\" title=\"Ycharts\" tg-width=\"635\" tg-height=\"424\"/><span>Ycharts</span></p><p>Let&#39;s compare this price evolution to its most well-known American competitor, Amazon (AMZN). Alibaba stock topped on the 27th of October 2020 at almost $320 per share. Since January 2020, Amazon had a return of 110.7%, while Alibaba returned -56.41%. Not what you like to see if you are a BABA investor.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/3f9ace2fd75d6311c06c74a8972ef35b\" alt=\"Ycharts\" title=\"Ycharts\" tg-width=\"635\" tg-height=\"439\"/><span>Ycharts</span></p><p>Overall, this slow period in the Chinese economy is further fuel to our bull case as an acceleration of the Chinese economy will significantly benefit Alibaba. Furthermore, we believe the depressed economy by far outweighs the potential geopolitical risk at this moment in time. The likelihood of China invading Taiwan remains relatively low in the near future.</p><h2 id=\"id_753864216\">Is It Cheap Enough?</h2><p>In this paragraph, we will take a look at some of the key financial metrics and compare them to other e-commerce players.</p><p>Let&#39;s get this out of the way first. Alibaba is cheap, very cheap. Nonetheless, it isn&#39;t getting any love from investors, what&#39;s the reason behind this, you might ask, we will take a look at this in the next paragraph, but first let&#39;s take a look at the revenue and gross profit growth.</p><p>As can be seen in the chart below, Alibaba&#39;s revenue has soared till 2022, where it peaked at $134,539.60M, gross profit peaked as well, at $49,578.40M. But, if you take a close look at the chart, you can see that the gross profit is almost back at the same level with the TTM gross profit currently sitting at $49,578.40M.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e251c981965c77185dd6c769f0a9e6ac\" alt=\"Stock Info\" title=\"Stock Info\" tg-width=\"640\" tg-height=\"450\"/><span>Stock Info</span></p><p>Now, let&#39;s take a look at the CAGRs. The revenue CAGR since 2015 is 29.57%, while the gross profit CAGR since 2015 is close to 21%. Very impressive numbers to say the least. While the revenue and gross profit have gone nowhere since 2022, the 5Y CAGRs are still 17.64% and 12.61% respectively for revenue and gross profit. It&#39;s not as great, but still very solid.</p><p>In addition, the gross margin is going back in the right direction again as well, with the TTM gross margin sitting at 37.91% up from 36.85% in both 2022 and 2023.</p><p>An important thing to note is where this revenue is coming from. In the table below, you can see that by far the biggest contributor to its revenue is the China Commerce Retail segment, contributing 63% of the total revenue.</p><p>What is interesting to note is that Alibaba seems to have focused more on profitability over the last year. Of the 6 largest revenue drivers, all are posting a positive EBITDA this quarter. This is in stark contrast to the same quarter last year, where 4 out of 6 still posted negative EBITDA numbers.</p><p>What is interesting to see is that Alibaba&#39;s revenue has now become a bit more diversified compared to when we last wrote about it is a positive sign. Nevertheless, China Commerce Retail remains the one to watch, China Commerce Retail includes Taobao and Tmall, the national eCommerce platforms.</p><p>It is pretty clear that this is Alibaba&#39;s bread and butter of Alibaba&#39;s bottom line.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/87833774232deef6b8dd837868849066\" alt=\"Stock Info\" title=\"Stock Info\" tg-width=\"640\" tg-height=\"305\"/><span>Stock Info</span></p><h3 id=\"id_824264825\">Taobao and Tmall</h3><p>Taobao, launched in 2003, is a C2C marketplace, it has been widely adopted in China and competes with JD.com (JD). Taobao is focused on selling a wide variety of products at a very low price. Volume is thus crucial to generate a significant amount of cash.</p><p>On the other hand, you have Tmall which was previously a subdivision of Taobao. Tmall is now an independent division focused on B2C eCommerce that focuses on the quality of merchants by implementing authorization checks. This increases the credibility of the merchants.</p><p>Both platforms are intertwined as the large logistics network from Taobao is used by Tmall as well, as the large volume going through requires significant logistics infrastructure to ensure seamless delivery.</p><p>Gross Merchandise Value (GMV) of Taobao and Tmall is $616.8B and $597.0B, respectively. In comparison, Amazon generated $692.8B in GMV in 2022. Competitors like Pinduoduo and JD.com had a GMV of $541.4B and $570.1B, respectively.</p><h3 id=\"id_4117729744\">Some Other Metrics</h3><p>Now let&#39;s take a look at some other metrics, in 2023 Alibaba generated over $24B in FCF. Nevertheless, it is important to take into consideration that Alibaba pays out a significant amount of stock-based compensation (SBC). 25% of the FCF goes to stock-based compensation, which is quite a significant portion for a company that isn&#39;t in its hyper-growth stage anymore.</p><p>In addition, the company has $86.56B in Total Cash &amp; ST Investments on its balance sheet. With the current share price, this means the company is trading at just 2.13x its cash and ST equivalents. This is mind-boggling for a company like Alibaba.</p><p>Let&#39;s look a little bit further at some multiples.</p><p>The price to FCF and the PS ratio are both at the lowest point in history.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/dd5a3143faf5b2a1f5f12958c36f3a3e\" alt=\"Ycharts\" title=\"Ycharts\" tg-width=\"635\" tg-height=\"439\"/><span>Ycharts</span></p><p>With the current FCF of over $24B, it currently has an FCF Yield of 13.1%, according to SA this is even higher with 14.53% at the moment of writing. Again, do note that 1/4th of this FCF goes to SBC.</p><p>Furthermore, Alibaba is the cheapest Mega Cap tech stock there is out there. Let&#39;s take a look at the EV/EBITDA multiple of Alibaba compared to some of the giants in the industry. In addition, we added <a href=\"https://laohu8.com/S/MELI\">MercadoLibre</a> as this is a peer in an emerging market, which makes it a good comparison. We wrote an article about this stellar company as well, which you can check out here.</p><p>In this comparison, we used Pinduoduo (PDD), Tencent (OTCPK:TCEHY), MercadoLibre (MELI), Alphabet (GOOGL), Microsoft (MSFT), Amazon, Nvidia (NVDA), and Apple (AAPL). You can see Alibaba is the cheapest by quite a large margin.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e3f12bf6be3dba767b5e2142f0db8fc9\" alt=\"Ycharts\" title=\"Ycharts\" tg-width=\"635\" tg-height=\"575\"/><span>Ycharts</span></p><h3 id=\"id_1198924550\">Valuation</h3><p>Now that we have discussed some of the metrics, let&#39;s take a quick look at some possible valuation scenarios for the next few years. While a DCF remains the most accurate way to value a company, it still has quite a decent amount of flaws. Normally, a reverse DCF would be my preferred method to look at companies, but I think a P/FCF valuation study is actually pretty interesting for Alibaba, currently.</p><p>Alibaba is currently growing at a steady pace, with a 5Y free cash flow CAGR of 11%, for this example, we will take a much more conservative FCF growth of just 6%. The current P/FCF is around 6.9x, we believe this is very close to the bear case for the company. As such, we decided to put P/FCF for the bear case at 6.5x. Further assumptions in this model are a decrease in shares outstanding of 2.50% per year (the last 2 years this was 3%+).</p><p>As you can see, these metrics are quite conservative, but when looking at Alibaba over the last 2 years, being conservative seems like the right way to go.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/de748dbfa0e76579767f8c45d3646ee2\" alt=\"Stock Info\" title=\"Stock Info\" tg-width=\"640\" tg-height=\"137\"/><span>Stock Info</span></p><p>As you can see, if BABA&#39;s sentiment even remotely improves the stock price could quickly soar, even in our base case the valuation for 2025 is as much as $135.06, which is almost double its current share price.</p><p>If BABA would go back to P/FCF&#39;s valuation of the pre-COVID-19 era, we would already be sitting in the super bull case, so even that scenario isn&#39;t necessarily super extreme in case Alibaba can go back to its former glory.</p><h2 id=\"id_3553795266\">The Risks Are Still There</h2><p>While Alibaba stock is cheap, the risks we talked about in our last article, which we wrote almost a year ago, are still there.</p><p>It is pretty simple: if Alibaba were located in Europe or in the United States, the company would deserve a much higher multiple. Due to Alibaba being headquartered in China, the company has to work under the influence. A lot of us still remember the &#34;Big Tech Crackdown&#34;. What exactly is/was the &#34;Big Tech Crackdown&#34;?</p><p>It can be best described as &#34; measures such as antitrust probes, data security overhauls, and a check on capitalist &#34;excess.&#34; These measures have targeted a wide range of sectors and have been carried out by various agencies, with varying justifications.&#34; This wiped out over a trillion dollars in value of Chinese companies. The reason for this has never been clearly communicated, but it is fair to assume that the CCP wanted to show its power and lower the power of the big tech companies in China. If you want to learn more about all the risks associated with Alibaba, we recommend reading our prior article on Alibaba.</p><h2 id=\"id_984637787\">Recent Earnings</h2><p>Alibaba reported earnings last week, they beat revenue by $270M and EPS by $0.03. While this looks pretty good at first glance, it must be said that they weren&#39;t great. Revenue grew by 5.1% year over year, nowhere close to the growth they had in previous years, but this is already baked in the stock price, in my opinion.</p><p>More worrisome is the income from operations. Operating income has declined over the last 3 quarters. In addition, it is now lower than the same quarter last year, $4.367B versus $5.473B in the year prior. This is a 20% decline in just a year. In addition, interest expense went up from $225M the year prior to $300M.</p><p>Earlier in the article, we showed a chart with the segment revenue. As you saw, China Commerce Retail is by far the biggest segment. Unfortunately, the Chinese economy isn&#39;t doing too well at this moment in time, which is weighted on Alibaba&#39;s results. In addition, this might hurt Alibaba for a while longer, although there are signs of improvement in China.</p><p>International commerce, on the other hand, showed strong growth, revenue for the segment came in at $4B, an increase of 44 year-over-year.</p><p>All in all, not much has changed for Alibaba, the only thing that happened over the last year is that the stock continued to decline.</p><p>Nonetheless, the company announced increased buybacks of an additional $25B. Furthermore, they announced that they will start paying a $1 yearly dividend or a dividend yield of 1.35%, which might attract dividend investors.</p><p>Another good sign we saw was both Joe Tsai and Jack Ma buying stock starting in Q3 throughout the end of the year. Insider buying is always a good sign, as insiders only buy for one reason, they believe the stock is going up.</p><h2 id=\"id_2634297064\">Conclusion</h2><p>We believe Alibaba is a solid value play. The stock is still in a steep downtrend and it would be wise to wait for a breakout on the chart for the best risk/reward opportunity. Nevertheless, if you can stomach the volatility and have a long time horizon, a small position in Alibaba could be a great addition to your portfolio.</p><p>Nonetheless, there still are significant risks and a discount on the stock will always exist due to all the risks associated with holding a Chinese company. But, if the sentiment improves once again, we could quickly see multiple expansion on Alibaba and the stock price is likely to go much higher from here.</p><p>Alibaba might have a few more tough quarters, but it is still a powerhouse in e-commerce and is growing its other segments at a solid pace. As such, I believe the worst for the company is already behind us, if this is the case for the stock, I have to be honest and I have no idea. The stock has been very cheap for a while and might continue to stay cheap for some time.</p><p>Nevertheless, we will still rate Alibaba as a strong buy as it is simply too cheap to ignore and the risk/reward is simply too exciting to ignore.</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: When Will The Sentiment Turn Around?</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: When Will The Sentiment Turn Around?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-02-22 11:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4671874-alibaba-when-will-the-sentiment-turn-around><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Alibaba stock has experienced a steep decline, losing as much as 81.83% and currently down 77%.The Chinese economy is slow, but an acceleration would greatly benefit Alibaba. This could cause ...</p>\n\n<a href=\"https://seekingalpha.com/article/4671874-alibaba-when-will-the-sentiment-turn-around\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","LU0359201612.USD":"贝莱德中国基金A2","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0516422440.USD":"FULLERTON LUX FUNDS - ASIA FOCUS EQUITIES \"A\" (USD) ACC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD)   INC","IE00B1B80R65.USD":"柏瑞拉丁美洲股票A","IE00B775SV38.USD":"NEUBERGER BERMAN US MULTICAP OPPORTUNITIES \"A\" (USD) ACC","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","LU0516422952.EUR":"FULLERTON LUX FUNDS - ASIA FOCUS EQUITIES \"I\" (EUR) ACC","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0320764755.SGD":"FTIF - Templeton Asian Growth A Acc SGD","LU0079474960.USD":"联博美国增长基金A","LU0417516738.SGD":"Allianz Hong Kong Equity AT Acc SGD","LU0228659784.USD":"施罗德金砖四国基金","09988":"阿里巴巴-W","SG9999014674.SGD":"Nikko AM All China Equity A SGD","LU2265009873.SGD":"Eastspring Investments - Global Growth Equity AS SGD-H","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0651946864.USD":"贝莱德新兴市场股票收益A2","SG9999002463.SGD":"LionGlobal China Growth SGD","LU0494093205.USD":"贝莱德ESG灵活多元资产A2 USD-H","LU0572944931.SGD":"Janus Henderson Horizon China Opportunities A2 SGD","BK4220":"综合零售","LU0211977185.USD":"EASTSPRING INVESTMENTS GREATER CHINA EQUITY \"A\" ACC","LU0820561909.HKD":"ALLIANZ INCOME AND GROWTH \"AM\" (HKD) INC","BABA":"阿里巴巴","LU1804176565.USD":"EASTSPRING INV GLOBAL GROWTH EQUITY \"A\" (USD) ACC","LU0163747925.USD":"EASTSPRING INVESTMENTS ASIAN EQUITY A ACC","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","LU0384037296.USD":"ALLIANZ ASIAN MULTI INCOME PLUS \"AT\" (USD) ACC","LU1048596156.SGD":"Blackrock Asian Growth Leaders A2 SGD-H","LU0287142896.SGD":"Fidelity China Focus A-SGD","IE00B3M56506.USD":"NEUBERGER BERMAN EMERGING MARKETS EQUITY \"A\" (USD) ACC","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0316494557.USD":"FRANKLIN GLOBAL FUNDAMENTAL STRATEGIES \"A\" ACC","LU0211327993.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (USD) ACC","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC"},"source_url":"https://seekingalpha.com/article/4671874-alibaba-when-will-the-sentiment-turn-around","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2413285454","content_text":"Alibaba stock has experienced a steep decline, losing as much as 81.83% and currently down 77%.The Chinese economy is slow, but an acceleration would greatly benefit Alibaba. This could cause significant multiple expansion and as such a swift increase in the stock price.Alibaba is cheap compared to other e-commerce players, with impressive financial metrics and multiples.It might be wise to wait for a technical breakout to get the best possible risk/reward opportunity.We believe Alibaba is a strong buy as the underlying value is simply too big to ignore.Bloomberg/Bloomberg via Getty ImagesIntroductionThe last time we wrote about Alibaba (NYSE:BABA) was almost a year ago. In this article, we will take a deeper look at what changed and why we remain bullish.Alibaba was once a beloved investment for growth and value investors all over the world. In more recent years, the company hasn't received much love. The disappearance of Jack Ma, regulation fears, trade war fears, and even geopolitical fears with the possible scenario of China invading Taiwan.In my opinion, the risks associated with China were grossly underestimated in the crazy market hausse we saw in 2020-2021. Since then, the stock has been in a steep downtrend losing as much as 81.83% at one point and currently still down a staggering 77%.Nevertheless, it is important to remember that the Chinese economy as a whole is pretty slow right now. The whole Shanghai index has been on a decline since early 2021.This has multiple reasons, the Chinese economy still hasn't recovered from the COVID-19 lockdowns. That the Chinese economy is slow can be seen in both the CPI and the manufacturing index. The CPI is even showing signs of deflation at this moment in time.This is the main reason why Alibaba hasn't been able to recover since our last write-up. Nevertheless, we indicated that Alibaba is a long-term play and one shouldn't expect immediate results from this stock. At the current valuation, Alibaba is simply too cheap to ignore, but I would wait for the sentiment to turn before buying into the stock for the optimal risk/reward.YchartsLet's compare this price evolution to its most well-known American competitor, Amazon (AMZN). Alibaba stock topped on the 27th of October 2020 at almost $320 per share. Since January 2020, Amazon had a return of 110.7%, while Alibaba returned -56.41%. Not what you like to see if you are a BABA investor.YchartsOverall, this slow period in the Chinese economy is further fuel to our bull case as an acceleration of the Chinese economy will significantly benefit Alibaba. Furthermore, we believe the depressed economy by far outweighs the potential geopolitical risk at this moment in time. The likelihood of China invading Taiwan remains relatively low in the near future.Is It Cheap Enough?In this paragraph, we will take a look at some of the key financial metrics and compare them to other e-commerce players.Let's get this out of the way first. Alibaba is cheap, very cheap. Nonetheless, it isn't getting any love from investors, what's the reason behind this, you might ask, we will take a look at this in the next paragraph, but first let's take a look at the revenue and gross profit growth.As can be seen in the chart below, Alibaba's revenue has soared till 2022, where it peaked at $134,539.60M, gross profit peaked as well, at $49,578.40M. But, if you take a close look at the chart, you can see that the gross profit is almost back at the same level with the TTM gross profit currently sitting at $49,578.40M.Stock InfoNow, let's take a look at the CAGRs. The revenue CAGR since 2015 is 29.57%, while the gross profit CAGR since 2015 is close to 21%. Very impressive numbers to say the least. While the revenue and gross profit have gone nowhere since 2022, the 5Y CAGRs are still 17.64% and 12.61% respectively for revenue and gross profit. It's not as great, but still very solid.In addition, the gross margin is going back in the right direction again as well, with the TTM gross margin sitting at 37.91% up from 36.85% in both 2022 and 2023.An important thing to note is where this revenue is coming from. In the table below, you can see that by far the biggest contributor to its revenue is the China Commerce Retail segment, contributing 63% of the total revenue.What is interesting to note is that Alibaba seems to have focused more on profitability over the last year. Of the 6 largest revenue drivers, all are posting a positive EBITDA this quarter. This is in stark contrast to the same quarter last year, where 4 out of 6 still posted negative EBITDA numbers.What is interesting to see is that Alibaba's revenue has now become a bit more diversified compared to when we last wrote about it is a positive sign. Nevertheless, China Commerce Retail remains the one to watch, China Commerce Retail includes Taobao and Tmall, the national eCommerce platforms.It is pretty clear that this is Alibaba's bread and butter of Alibaba's bottom line.Stock InfoTaobao and TmallTaobao, launched in 2003, is a C2C marketplace, it has been widely adopted in China and competes with JD.com (JD). Taobao is focused on selling a wide variety of products at a very low price. Volume is thus crucial to generate a significant amount of cash.On the other hand, you have Tmall which was previously a subdivision of Taobao. Tmall is now an independent division focused on B2C eCommerce that focuses on the quality of merchants by implementing authorization checks. This increases the credibility of the merchants.Both platforms are intertwined as the large logistics network from Taobao is used by Tmall as well, as the large volume going through requires significant logistics infrastructure to ensure seamless delivery.Gross Merchandise Value (GMV) of Taobao and Tmall is $616.8B and $597.0B, respectively. In comparison, Amazon generated $692.8B in GMV in 2022. Competitors like Pinduoduo and JD.com had a GMV of $541.4B and $570.1B, respectively.Some Other MetricsNow let's take a look at some other metrics, in 2023 Alibaba generated over $24B in FCF. Nevertheless, it is important to take into consideration that Alibaba pays out a significant amount of stock-based compensation (SBC). 25% of the FCF goes to stock-based compensation, which is quite a significant portion for a company that isn't in its hyper-growth stage anymore.In addition, the company has $86.56B in Total Cash & ST Investments on its balance sheet. With the current share price, this means the company is trading at just 2.13x its cash and ST equivalents. This is mind-boggling for a company like Alibaba.Let's look a little bit further at some multiples.The price to FCF and the PS ratio are both at the lowest point in history.YchartsWith the current FCF of over $24B, it currently has an FCF Yield of 13.1%, according to SA this is even higher with 14.53% at the moment of writing. Again, do note that 1/4th of this FCF goes to SBC.Furthermore, Alibaba is the cheapest Mega Cap tech stock there is out there. Let's take a look at the EV/EBITDA multiple of Alibaba compared to some of the giants in the industry. In addition, we added MercadoLibre as this is a peer in an emerging market, which makes it a good comparison. We wrote an article about this stellar company as well, which you can check out here.In this comparison, we used Pinduoduo (PDD), Tencent (OTCPK:TCEHY), MercadoLibre (MELI), Alphabet (GOOGL), Microsoft (MSFT), Amazon, Nvidia (NVDA), and Apple (AAPL). You can see Alibaba is the cheapest by quite a large margin.YchartsValuationNow that we have discussed some of the metrics, let's take a quick look at some possible valuation scenarios for the next few years. While a DCF remains the most accurate way to value a company, it still has quite a decent amount of flaws. Normally, a reverse DCF would be my preferred method to look at companies, but I think a P/FCF valuation study is actually pretty interesting for Alibaba, currently.Alibaba is currently growing at a steady pace, with a 5Y free cash flow CAGR of 11%, for this example, we will take a much more conservative FCF growth of just 6%. The current P/FCF is around 6.9x, we believe this is very close to the bear case for the company. As such, we decided to put P/FCF for the bear case at 6.5x. Further assumptions in this model are a decrease in shares outstanding of 2.50% per year (the last 2 years this was 3%+).As you can see, these metrics are quite conservative, but when looking at Alibaba over the last 2 years, being conservative seems like the right way to go.Stock InfoAs you can see, if BABA's sentiment even remotely improves the stock price could quickly soar, even in our base case the valuation for 2025 is as much as $135.06, which is almost double its current share price.If BABA would go back to P/FCF's valuation of the pre-COVID-19 era, we would already be sitting in the super bull case, so even that scenario isn't necessarily super extreme in case Alibaba can go back to its former glory.The Risks Are Still ThereWhile Alibaba stock is cheap, the risks we talked about in our last article, which we wrote almost a year ago, are still there.It is pretty simple: if Alibaba were located in Europe or in the United States, the company would deserve a much higher multiple. Due to Alibaba being headquartered in China, the company has to work under the influence. A lot of us still remember the \"Big Tech Crackdown\". What exactly is/was the \"Big Tech Crackdown\"?It can be best described as \" measures such as antitrust probes, data security overhauls, and a check on capitalist \"excess.\" These measures have targeted a wide range of sectors and have been carried out by various agencies, with varying justifications.\" This wiped out over a trillion dollars in value of Chinese companies. The reason for this has never been clearly communicated, but it is fair to assume that the CCP wanted to show its power and lower the power of the big tech companies in China. If you want to learn more about all the risks associated with Alibaba, we recommend reading our prior article on Alibaba.Recent EarningsAlibaba reported earnings last week, they beat revenue by $270M and EPS by $0.03. While this looks pretty good at first glance, it must be said that they weren't great. Revenue grew by 5.1% year over year, nowhere close to the growth they had in previous years, but this is already baked in the stock price, in my opinion.More worrisome is the income from operations. Operating income has declined over the last 3 quarters. In addition, it is now lower than the same quarter last year, $4.367B versus $5.473B in the year prior. This is a 20% decline in just a year. In addition, interest expense went up from $225M the year prior to $300M.Earlier in the article, we showed a chart with the segment revenue. As you saw, China Commerce Retail is by far the biggest segment. Unfortunately, the Chinese economy isn't doing too well at this moment in time, which is weighted on Alibaba's results. In addition, this might hurt Alibaba for a while longer, although there are signs of improvement in China.International commerce, on the other hand, showed strong growth, revenue for the segment came in at $4B, an increase of 44 year-over-year.All in all, not much has changed for Alibaba, the only thing that happened over the last year is that the stock continued to decline.Nonetheless, the company announced increased buybacks of an additional $25B. Furthermore, they announced that they will start paying a $1 yearly dividend or a dividend yield of 1.35%, which might attract dividend investors.Another good sign we saw was both Joe Tsai and Jack Ma buying stock starting in Q3 throughout the end of the year. Insider buying is always a good sign, as insiders only buy for one reason, they believe the stock is going up.ConclusionWe believe Alibaba is a solid value play. The stock is still in a steep downtrend and it would be wise to wait for a breakout on the chart for the best risk/reward opportunity. Nevertheless, if you can stomach the volatility and have a long time horizon, a small position in Alibaba could be a great addition to your portfolio.Nonetheless, there still are significant risks and a discount on the stock will always exist due to all the risks associated with holding a Chinese company. But, if the sentiment improves once again, we could quickly see multiple expansion on Alibaba and the stock price is likely to go much higher from here.Alibaba might have a few more tough quarters, but it is still a powerhouse in e-commerce and is growing its other segments at a solid pace. As such, I believe the worst for the company is already behind us, if this is the case for the stock, I have to be honest and I have no idea. The stock has been very cheap for a while and might continue to stay cheap for some time.Nevertheless, we will still rate Alibaba as a strong buy as it is simply too cheap to ignore and the risk/reward is simply too exciting to ignore.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":276678441885776,"gmtCreate":1708578719200,"gmtModify":1708578723530,"author":{"id":"3581744193958444","authorId":"3581744193958444","name":"ninjainvest","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"hat":"https://static.tigerbbs.com/646756f1284a5a6480ed02cc4fa7d1d2","crmLevel":5,"crmLevelSwitch":0,"idStr":"3581744193958444","authorIdStr":"3581744193958444"},"htmlText":"how long have u waited for it to turnaround? It wont turn around already, not in the near future.&nbsp;","listText":"how long have u waited for it to turnaround? It wont turn around already, not in the near future.&nbsp;","text":"how long have u waited for it to turnaround? It wont turn around already, not in the near future.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/276678441885776","repostId":2413285454,"repostType":2,"repost":{"id":"2413285454","kind":"highlight","pubTimestamp":1708572600,"share":"https://ttm.financial/m/news/2413285454?lang=&edition=fundamental","pubTime":"2024-02-22 11:30","market":"hk","language":"en","title":"Alibaba: When Will The Sentiment Turn Around?","url":"https://stock-news.laohu8.com/highlight/detail?id=2413285454","media":"Seeking Alpha","summary":"In this paragraph, we will take a look at some of the key financial metrics and compare them to other e-commerce players.Let's get this out of the way first. Alibaba is cheap, very cheap. N","content":"<html><head></head><body><ul style=\"\"><li><p>Alibaba stock has experienced a steep decline, losing as much as 81.83% and currently down 77%.</p></li><li><p>The Chinese economy is slow, but an acceleration would greatly benefit Alibaba. This could cause significant multiple expansion and as such a swift increase in the stock price.</p></li><li><p>Alibaba is cheap compared to other e-commerce players, with impressive financial metrics and multiples.</p></li><li><p>It might be wise to wait for a technical breakout to get the best possible risk/reward opportunity.</p></li><li><p>We believe Alibaba is a strong buy as the underlying value is simply too big to ignore.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/2cdf92b7af42e3d9039fc082a2fe740c\" alt=\"Bloomberg/Bloomberg via Getty Images\" title=\"Bloomberg/Bloomberg via Getty Images\" tg-width=\"594\" tg-height=\"396\"/><span>Bloomberg/Bloomberg via Getty Images</span></p><h2 id=\"id_557719550\">Introduction</h2><p>The last time we wrote about Alibaba (NYSE:BABA) was almost a year ago. In this article, we will take a deeper look at what changed and why we remain bullish.</p><p>Alibaba was once a beloved investment for growth and value investors all over the world. In more recent years, the company hasn&#39;t received much love. The disappearance of Jack Ma, regulation fears, trade war fears, and even geopolitical fears with the possible scenario of China invading Taiwan.</p><p>In my opinion, the risks associated with China were grossly underestimated in the crazy market hausse we saw in 2020-2021. Since then, the stock has been in a steep downtrend losing as much as 81.83% at one point and currently still down a staggering 77%.</p><p>Nevertheless, it is important to remember that the Chinese economy as a whole is pretty slow right now. The whole Shanghai index has been on a decline since early 2021.</p><p>This has multiple reasons, the Chinese economy still hasn&#39;t recovered from the COVID-19 lockdowns. That the Chinese economy is slow can be seen in both the CPI and the manufacturing index. The CPI is even showing signs of deflation at this moment in time.</p><p>This is the main reason why Alibaba hasn&#39;t been able to recover since our last write-up. Nevertheless, we indicated that Alibaba is a long-term play and one shouldn&#39;t expect immediate results from this stock. At the current valuation, Alibaba is simply too cheap to ignore, but I would wait for the sentiment to turn before buying into the stock for the optimal risk/reward.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/536029bc5d59f97c7e158e3508f97d87\" alt=\"Ycharts\" title=\"Ycharts\" tg-width=\"635\" tg-height=\"424\"/><span>Ycharts</span></p><p>Let&#39;s compare this price evolution to its most well-known American competitor, Amazon (AMZN). Alibaba stock topped on the 27th of October 2020 at almost $320 per share. Since January 2020, Amazon had a return of 110.7%, while Alibaba returned -56.41%. Not what you like to see if you are a BABA investor.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/3f9ace2fd75d6311c06c74a8972ef35b\" alt=\"Ycharts\" title=\"Ycharts\" tg-width=\"635\" tg-height=\"439\"/><span>Ycharts</span></p><p>Overall, this slow period in the Chinese economy is further fuel to our bull case as an acceleration of the Chinese economy will significantly benefit Alibaba. Furthermore, we believe the depressed economy by far outweighs the potential geopolitical risk at this moment in time. The likelihood of China invading Taiwan remains relatively low in the near future.</p><h2 id=\"id_753864216\">Is It Cheap Enough?</h2><p>In this paragraph, we will take a look at some of the key financial metrics and compare them to other e-commerce players.</p><p>Let&#39;s get this out of the way first. Alibaba is cheap, very cheap. Nonetheless, it isn&#39;t getting any love from investors, what&#39;s the reason behind this, you might ask, we will take a look at this in the next paragraph, but first let&#39;s take a look at the revenue and gross profit growth.</p><p>As can be seen in the chart below, Alibaba&#39;s revenue has soared till 2022, where it peaked at $134,539.60M, gross profit peaked as well, at $49,578.40M. But, if you take a close look at the chart, you can see that the gross profit is almost back at the same level with the TTM gross profit currently sitting at $49,578.40M.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e251c981965c77185dd6c769f0a9e6ac\" alt=\"Stock Info\" title=\"Stock Info\" tg-width=\"640\" tg-height=\"450\"/><span>Stock Info</span></p><p>Now, let&#39;s take a look at the CAGRs. The revenue CAGR since 2015 is 29.57%, while the gross profit CAGR since 2015 is close to 21%. Very impressive numbers to say the least. While the revenue and gross profit have gone nowhere since 2022, the 5Y CAGRs are still 17.64% and 12.61% respectively for revenue and gross profit. It&#39;s not as great, but still very solid.</p><p>In addition, the gross margin is going back in the right direction again as well, with the TTM gross margin sitting at 37.91% up from 36.85% in both 2022 and 2023.</p><p>An important thing to note is where this revenue is coming from. In the table below, you can see that by far the biggest contributor to its revenue is the China Commerce Retail segment, contributing 63% of the total revenue.</p><p>What is interesting to note is that Alibaba seems to have focused more on profitability over the last year. Of the 6 largest revenue drivers, all are posting a positive EBITDA this quarter. This is in stark contrast to the same quarter last year, where 4 out of 6 still posted negative EBITDA numbers.</p><p>What is interesting to see is that Alibaba&#39;s revenue has now become a bit more diversified compared to when we last wrote about it is a positive sign. Nevertheless, China Commerce Retail remains the one to watch, China Commerce Retail includes Taobao and Tmall, the national eCommerce platforms.</p><p>It is pretty clear that this is Alibaba&#39;s bread and butter of Alibaba&#39;s bottom line.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/87833774232deef6b8dd837868849066\" alt=\"Stock Info\" title=\"Stock Info\" tg-width=\"640\" tg-height=\"305\"/><span>Stock Info</span></p><h3 id=\"id_824264825\">Taobao and Tmall</h3><p>Taobao, launched in 2003, is a C2C marketplace, it has been widely adopted in China and competes with JD.com (JD). Taobao is focused on selling a wide variety of products at a very low price. Volume is thus crucial to generate a significant amount of cash.</p><p>On the other hand, you have Tmall which was previously a subdivision of Taobao. Tmall is now an independent division focused on B2C eCommerce that focuses on the quality of merchants by implementing authorization checks. This increases the credibility of the merchants.</p><p>Both platforms are intertwined as the large logistics network from Taobao is used by Tmall as well, as the large volume going through requires significant logistics infrastructure to ensure seamless delivery.</p><p>Gross Merchandise Value (GMV) of Taobao and Tmall is $616.8B and $597.0B, respectively. In comparison, Amazon generated $692.8B in GMV in 2022. Competitors like Pinduoduo and JD.com had a GMV of $541.4B and $570.1B, respectively.</p><h3 id=\"id_4117729744\">Some Other Metrics</h3><p>Now let&#39;s take a look at some other metrics, in 2023 Alibaba generated over $24B in FCF. Nevertheless, it is important to take into consideration that Alibaba pays out a significant amount of stock-based compensation (SBC). 25% of the FCF goes to stock-based compensation, which is quite a significant portion for a company that isn&#39;t in its hyper-growth stage anymore.</p><p>In addition, the company has $86.56B in Total Cash &amp; ST Investments on its balance sheet. With the current share price, this means the company is trading at just 2.13x its cash and ST equivalents. This is mind-boggling for a company like Alibaba.</p><p>Let&#39;s look a little bit further at some multiples.</p><p>The price to FCF and the PS ratio are both at the lowest point in history.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/dd5a3143faf5b2a1f5f12958c36f3a3e\" alt=\"Ycharts\" title=\"Ycharts\" tg-width=\"635\" tg-height=\"439\"/><span>Ycharts</span></p><p>With the current FCF of over $24B, it currently has an FCF Yield of 13.1%, according to SA this is even higher with 14.53% at the moment of writing. Again, do note that 1/4th of this FCF goes to SBC.</p><p>Furthermore, Alibaba is the cheapest Mega Cap tech stock there is out there. Let&#39;s take a look at the EV/EBITDA multiple of Alibaba compared to some of the giants in the industry. In addition, we added <a href=\"https://laohu8.com/S/MELI\">MercadoLibre</a> as this is a peer in an emerging market, which makes it a good comparison. We wrote an article about this stellar company as well, which you can check out here.</p><p>In this comparison, we used Pinduoduo (PDD), Tencent (OTCPK:TCEHY), MercadoLibre (MELI), Alphabet (GOOGL), Microsoft (MSFT), Amazon, Nvidia (NVDA), and Apple (AAPL). You can see Alibaba is the cheapest by quite a large margin.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e3f12bf6be3dba767b5e2142f0db8fc9\" alt=\"Ycharts\" title=\"Ycharts\" tg-width=\"635\" tg-height=\"575\"/><span>Ycharts</span></p><h3 id=\"id_1198924550\">Valuation</h3><p>Now that we have discussed some of the metrics, let&#39;s take a quick look at some possible valuation scenarios for the next few years. While a DCF remains the most accurate way to value a company, it still has quite a decent amount of flaws. Normally, a reverse DCF would be my preferred method to look at companies, but I think a P/FCF valuation study is actually pretty interesting for Alibaba, currently.</p><p>Alibaba is currently growing at a steady pace, with a 5Y free cash flow CAGR of 11%, for this example, we will take a much more conservative FCF growth of just 6%. The current P/FCF is around 6.9x, we believe this is very close to the bear case for the company. As such, we decided to put P/FCF for the bear case at 6.5x. Further assumptions in this model are a decrease in shares outstanding of 2.50% per year (the last 2 years this was 3%+).</p><p>As you can see, these metrics are quite conservative, but when looking at Alibaba over the last 2 years, being conservative seems like the right way to go.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/de748dbfa0e76579767f8c45d3646ee2\" alt=\"Stock Info\" title=\"Stock Info\" tg-width=\"640\" tg-height=\"137\"/><span>Stock Info</span></p><p>As you can see, if BABA&#39;s sentiment even remotely improves the stock price could quickly soar, even in our base case the valuation for 2025 is as much as $135.06, which is almost double its current share price.</p><p>If BABA would go back to P/FCF&#39;s valuation of the pre-COVID-19 era, we would already be sitting in the super bull case, so even that scenario isn&#39;t necessarily super extreme in case Alibaba can go back to its former glory.</p><h2 id=\"id_3553795266\">The Risks Are Still There</h2><p>While Alibaba stock is cheap, the risks we talked about in our last article, which we wrote almost a year ago, are still there.</p><p>It is pretty simple: if Alibaba were located in Europe or in the United States, the company would deserve a much higher multiple. Due to Alibaba being headquartered in China, the company has to work under the influence. A lot of us still remember the &#34;Big Tech Crackdown&#34;. What exactly is/was the &#34;Big Tech Crackdown&#34;?</p><p>It can be best described as &#34; measures such as antitrust probes, data security overhauls, and a check on capitalist &#34;excess.&#34; These measures have targeted a wide range of sectors and have been carried out by various agencies, with varying justifications.&#34; This wiped out over a trillion dollars in value of Chinese companies. The reason for this has never been clearly communicated, but it is fair to assume that the CCP wanted to show its power and lower the power of the big tech companies in China. If you want to learn more about all the risks associated with Alibaba, we recommend reading our prior article on Alibaba.</p><h2 id=\"id_984637787\">Recent Earnings</h2><p>Alibaba reported earnings last week, they beat revenue by $270M and EPS by $0.03. While this looks pretty good at first glance, it must be said that they weren&#39;t great. Revenue grew by 5.1% year over year, nowhere close to the growth they had in previous years, but this is already baked in the stock price, in my opinion.</p><p>More worrisome is the income from operations. Operating income has declined over the last 3 quarters. In addition, it is now lower than the same quarter last year, $4.367B versus $5.473B in the year prior. This is a 20% decline in just a year. In addition, interest expense went up from $225M the year prior to $300M.</p><p>Earlier in the article, we showed a chart with the segment revenue. As you saw, China Commerce Retail is by far the biggest segment. Unfortunately, the Chinese economy isn&#39;t doing too well at this moment in time, which is weighted on Alibaba&#39;s results. In addition, this might hurt Alibaba for a while longer, although there are signs of improvement in China.</p><p>International commerce, on the other hand, showed strong growth, revenue for the segment came in at $4B, an increase of 44 year-over-year.</p><p>All in all, not much has changed for Alibaba, the only thing that happened over the last year is that the stock continued to decline.</p><p>Nonetheless, the company announced increased buybacks of an additional $25B. Furthermore, they announced that they will start paying a $1 yearly dividend or a dividend yield of 1.35%, which might attract dividend investors.</p><p>Another good sign we saw was both Joe Tsai and Jack Ma buying stock starting in Q3 throughout the end of the year. Insider buying is always a good sign, as insiders only buy for one reason, they believe the stock is going up.</p><h2 id=\"id_2634297064\">Conclusion</h2><p>We believe Alibaba is a solid value play. The stock is still in a steep downtrend and it would be wise to wait for a breakout on the chart for the best risk/reward opportunity. Nevertheless, if you can stomach the volatility and have a long time horizon, a small position in Alibaba could be a great addition to your portfolio.</p><p>Nonetheless, there still are significant risks and a discount on the stock will always exist due to all the risks associated with holding a Chinese company. But, if the sentiment improves once again, we could quickly see multiple expansion on Alibaba and the stock price is likely to go much higher from here.</p><p>Alibaba might have a few more tough quarters, but it is still a powerhouse in e-commerce and is growing its other segments at a solid pace. As such, I believe the worst for the company is already behind us, if this is the case for the stock, I have to be honest and I have no idea. The stock has been very cheap for a while and might continue to stay cheap for some time.</p><p>Nevertheless, we will still rate Alibaba as a strong buy as it is simply too cheap to ignore and the risk/reward is simply too exciting to ignore.</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: When Will The Sentiment Turn Around?</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: When Will The Sentiment Turn Around?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-02-22 11:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4671874-alibaba-when-will-the-sentiment-turn-around><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Alibaba stock has experienced a steep decline, losing as much as 81.83% and currently down 77%.The Chinese economy is slow, but an acceleration would greatly benefit Alibaba. This could cause ...</p>\n\n<a href=\"https://seekingalpha.com/article/4671874-alibaba-when-will-the-sentiment-turn-around\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","LU0359201612.USD":"贝莱德中国基金A2","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0516422440.USD":"FULLERTON LUX FUNDS - ASIA FOCUS EQUITIES \"A\" (USD) ACC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD)   INC","IE00B1B80R65.USD":"柏瑞拉丁美洲股票A","IE00B775SV38.USD":"NEUBERGER BERMAN US MULTICAP OPPORTUNITIES \"A\" (USD) ACC","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","LU0516422952.EUR":"FULLERTON LUX FUNDS - ASIA FOCUS EQUITIES \"I\" (EUR) ACC","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0320764755.SGD":"FTIF - Templeton Asian Growth A Acc SGD","LU0079474960.USD":"联博美国增长基金A","LU0417516738.SGD":"Allianz Hong Kong Equity AT Acc SGD","LU0228659784.USD":"施罗德金砖四国基金","09988":"阿里巴巴-W","SG9999014674.SGD":"Nikko AM All China Equity A SGD","LU2265009873.SGD":"Eastspring Investments - Global Growth Equity AS SGD-H","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0651946864.USD":"贝莱德新兴市场股票收益A2","SG9999002463.SGD":"LionGlobal China Growth SGD","LU0494093205.USD":"贝莱德ESG灵活多元资产A2 USD-H","LU0572944931.SGD":"Janus Henderson Horizon China Opportunities A2 SGD","BK4220":"综合零售","LU0211977185.USD":"EASTSPRING INVESTMENTS GREATER CHINA EQUITY \"A\" ACC","LU0820561909.HKD":"ALLIANZ INCOME AND GROWTH \"AM\" (HKD) INC","BABA":"阿里巴巴","LU1804176565.USD":"EASTSPRING INV GLOBAL GROWTH EQUITY \"A\" (USD) ACC","LU0163747925.USD":"EASTSPRING INVESTMENTS ASIAN EQUITY A ACC","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","LU0384037296.USD":"ALLIANZ ASIAN MULTI INCOME PLUS \"AT\" (USD) ACC","LU1048596156.SGD":"Blackrock Asian Growth Leaders A2 SGD-H","LU0287142896.SGD":"Fidelity China Focus A-SGD","IE00B3M56506.USD":"NEUBERGER BERMAN EMERGING MARKETS EQUITY \"A\" (USD) ACC","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0316494557.USD":"FRANKLIN GLOBAL FUNDAMENTAL STRATEGIES \"A\" ACC","LU0211327993.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (USD) ACC","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC"},"source_url":"https://seekingalpha.com/article/4671874-alibaba-when-will-the-sentiment-turn-around","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2413285454","content_text":"Alibaba stock has experienced a steep decline, losing as much as 81.83% and currently down 77%.The Chinese economy is slow, but an acceleration would greatly benefit Alibaba. This could cause significant multiple expansion and as such a swift increase in the stock price.Alibaba is cheap compared to other e-commerce players, with impressive financial metrics and multiples.It might be wise to wait for a technical breakout to get the best possible risk/reward opportunity.We believe Alibaba is a strong buy as the underlying value is simply too big to ignore.Bloomberg/Bloomberg via Getty ImagesIntroductionThe last time we wrote about Alibaba (NYSE:BABA) was almost a year ago. In this article, we will take a deeper look at what changed and why we remain bullish.Alibaba was once a beloved investment for growth and value investors all over the world. In more recent years, the company hasn't received much love. The disappearance of Jack Ma, regulation fears, trade war fears, and even geopolitical fears with the possible scenario of China invading Taiwan.In my opinion, the risks associated with China were grossly underestimated in the crazy market hausse we saw in 2020-2021. Since then, the stock has been in a steep downtrend losing as much as 81.83% at one point and currently still down a staggering 77%.Nevertheless, it is important to remember that the Chinese economy as a whole is pretty slow right now. The whole Shanghai index has been on a decline since early 2021.This has multiple reasons, the Chinese economy still hasn't recovered from the COVID-19 lockdowns. That the Chinese economy is slow can be seen in both the CPI and the manufacturing index. The CPI is even showing signs of deflation at this moment in time.This is the main reason why Alibaba hasn't been able to recover since our last write-up. Nevertheless, we indicated that Alibaba is a long-term play and one shouldn't expect immediate results from this stock. At the current valuation, Alibaba is simply too cheap to ignore, but I would wait for the sentiment to turn before buying into the stock for the optimal risk/reward.YchartsLet's compare this price evolution to its most well-known American competitor, Amazon (AMZN). Alibaba stock topped on the 27th of October 2020 at almost $320 per share. Since January 2020, Amazon had a return of 110.7%, while Alibaba returned -56.41%. Not what you like to see if you are a BABA investor.YchartsOverall, this slow period in the Chinese economy is further fuel to our bull case as an acceleration of the Chinese economy will significantly benefit Alibaba. Furthermore, we believe the depressed economy by far outweighs the potential geopolitical risk at this moment in time. The likelihood of China invading Taiwan remains relatively low in the near future.Is It Cheap Enough?In this paragraph, we will take a look at some of the key financial metrics and compare them to other e-commerce players.Let's get this out of the way first. Alibaba is cheap, very cheap. Nonetheless, it isn't getting any love from investors, what's the reason behind this, you might ask, we will take a look at this in the next paragraph, but first let's take a look at the revenue and gross profit growth.As can be seen in the chart below, Alibaba's revenue has soared till 2022, where it peaked at $134,539.60M, gross profit peaked as well, at $49,578.40M. But, if you take a close look at the chart, you can see that the gross profit is almost back at the same level with the TTM gross profit currently sitting at $49,578.40M.Stock InfoNow, let's take a look at the CAGRs. The revenue CAGR since 2015 is 29.57%, while the gross profit CAGR since 2015 is close to 21%. Very impressive numbers to say the least. While the revenue and gross profit have gone nowhere since 2022, the 5Y CAGRs are still 17.64% and 12.61% respectively for revenue and gross profit. It's not as great, but still very solid.In addition, the gross margin is going back in the right direction again as well, with the TTM gross margin sitting at 37.91% up from 36.85% in both 2022 and 2023.An important thing to note is where this revenue is coming from. In the table below, you can see that by far the biggest contributor to its revenue is the China Commerce Retail segment, contributing 63% of the total revenue.What is interesting to note is that Alibaba seems to have focused more on profitability over the last year. Of the 6 largest revenue drivers, all are posting a positive EBITDA this quarter. This is in stark contrast to the same quarter last year, where 4 out of 6 still posted negative EBITDA numbers.What is interesting to see is that Alibaba's revenue has now become a bit more diversified compared to when we last wrote about it is a positive sign. Nevertheless, China Commerce Retail remains the one to watch, China Commerce Retail includes Taobao and Tmall, the national eCommerce platforms.It is pretty clear that this is Alibaba's bread and butter of Alibaba's bottom line.Stock InfoTaobao and TmallTaobao, launched in 2003, is a C2C marketplace, it has been widely adopted in China and competes with JD.com (JD). Taobao is focused on selling a wide variety of products at a very low price. Volume is thus crucial to generate a significant amount of cash.On the other hand, you have Tmall which was previously a subdivision of Taobao. Tmall is now an independent division focused on B2C eCommerce that focuses on the quality of merchants by implementing authorization checks. This increases the credibility of the merchants.Both platforms are intertwined as the large logistics network from Taobao is used by Tmall as well, as the large volume going through requires significant logistics infrastructure to ensure seamless delivery.Gross Merchandise Value (GMV) of Taobao and Tmall is $616.8B and $597.0B, respectively. In comparison, Amazon generated $692.8B in GMV in 2022. Competitors like Pinduoduo and JD.com had a GMV of $541.4B and $570.1B, respectively.Some Other MetricsNow let's take a look at some other metrics, in 2023 Alibaba generated over $24B in FCF. Nevertheless, it is important to take into consideration that Alibaba pays out a significant amount of stock-based compensation (SBC). 25% of the FCF goes to stock-based compensation, which is quite a significant portion for a company that isn't in its hyper-growth stage anymore.In addition, the company has $86.56B in Total Cash & ST Investments on its balance sheet. With the current share price, this means the company is trading at just 2.13x its cash and ST equivalents. This is mind-boggling for a company like Alibaba.Let's look a little bit further at some multiples.The price to FCF and the PS ratio are both at the lowest point in history.YchartsWith the current FCF of over $24B, it currently has an FCF Yield of 13.1%, according to SA this is even higher with 14.53% at the moment of writing. Again, do note that 1/4th of this FCF goes to SBC.Furthermore, Alibaba is the cheapest Mega Cap tech stock there is out there. Let's take a look at the EV/EBITDA multiple of Alibaba compared to some of the giants in the industry. In addition, we added MercadoLibre as this is a peer in an emerging market, which makes it a good comparison. We wrote an article about this stellar company as well, which you can check out here.In this comparison, we used Pinduoduo (PDD), Tencent (OTCPK:TCEHY), MercadoLibre (MELI), Alphabet (GOOGL), Microsoft (MSFT), Amazon, Nvidia (NVDA), and Apple (AAPL). You can see Alibaba is the cheapest by quite a large margin.YchartsValuationNow that we have discussed some of the metrics, let's take a quick look at some possible valuation scenarios for the next few years. While a DCF remains the most accurate way to value a company, it still has quite a decent amount of flaws. Normally, a reverse DCF would be my preferred method to look at companies, but I think a P/FCF valuation study is actually pretty interesting for Alibaba, currently.Alibaba is currently growing at a steady pace, with a 5Y free cash flow CAGR of 11%, for this example, we will take a much more conservative FCF growth of just 6%. The current P/FCF is around 6.9x, we believe this is very close to the bear case for the company. As such, we decided to put P/FCF for the bear case at 6.5x. Further assumptions in this model are a decrease in shares outstanding of 2.50% per year (the last 2 years this was 3%+).As you can see, these metrics are quite conservative, but when looking at Alibaba over the last 2 years, being conservative seems like the right way to go.Stock InfoAs you can see, if BABA's sentiment even remotely improves the stock price could quickly soar, even in our base case the valuation for 2025 is as much as $135.06, which is almost double its current share price.If BABA would go back to P/FCF's valuation of the pre-COVID-19 era, we would already be sitting in the super bull case, so even that scenario isn't necessarily super extreme in case Alibaba can go back to its former glory.The Risks Are Still ThereWhile Alibaba stock is cheap, the risks we talked about in our last article, which we wrote almost a year ago, are still there.It is pretty simple: if Alibaba were located in Europe or in the United States, the company would deserve a much higher multiple. Due to Alibaba being headquartered in China, the company has to work under the influence. A lot of us still remember the \"Big Tech Crackdown\". What exactly is/was the \"Big Tech Crackdown\"?It can be best described as \" measures such as antitrust probes, data security overhauls, and a check on capitalist \"excess.\" These measures have targeted a wide range of sectors and have been carried out by various agencies, with varying justifications.\" This wiped out over a trillion dollars in value of Chinese companies. The reason for this has never been clearly communicated, but it is fair to assume that the CCP wanted to show its power and lower the power of the big tech companies in China. If you want to learn more about all the risks associated with Alibaba, we recommend reading our prior article on Alibaba.Recent EarningsAlibaba reported earnings last week, they beat revenue by $270M and EPS by $0.03. While this looks pretty good at first glance, it must be said that they weren't great. Revenue grew by 5.1% year over year, nowhere close to the growth they had in previous years, but this is already baked in the stock price, in my opinion.More worrisome is the income from operations. Operating income has declined over the last 3 quarters. In addition, it is now lower than the same quarter last year, $4.367B versus $5.473B in the year prior. This is a 20% decline in just a year. In addition, interest expense went up from $225M the year prior to $300M.Earlier in the article, we showed a chart with the segment revenue. As you saw, China Commerce Retail is by far the biggest segment. Unfortunately, the Chinese economy isn't doing too well at this moment in time, which is weighted on Alibaba's results. In addition, this might hurt Alibaba for a while longer, although there are signs of improvement in China.International commerce, on the other hand, showed strong growth, revenue for the segment came in at $4B, an increase of 44 year-over-year.All in all, not much has changed for Alibaba, the only thing that happened over the last year is that the stock continued to decline.Nonetheless, the company announced increased buybacks of an additional $25B. Furthermore, they announced that they will start paying a $1 yearly dividend or a dividend yield of 1.35%, which might attract dividend investors.Another good sign we saw was both Joe Tsai and Jack Ma buying stock starting in Q3 throughout the end of the year. Insider buying is always a good sign, as insiders only buy for one reason, they believe the stock is going up.ConclusionWe believe Alibaba is a solid value play. The stock is still in a steep downtrend and it would be wise to wait for a breakout on the chart for the best risk/reward opportunity. Nevertheless, if you can stomach the volatility and have a long time horizon, a small position in Alibaba could be a great addition to your portfolio.Nonetheless, there still are significant risks and a discount on the stock will always exist due to all the risks associated with holding a Chinese company. But, if the sentiment improves once again, we could quickly see multiple expansion on Alibaba and the stock price is likely to go much higher from here.Alibaba might have a few more tough quarters, but it is still a powerhouse in e-commerce and is growing its other segments at a solid pace. As such, I believe the worst for the company is already behind us, if this is the case for the stock, I have to be honest and I have no idea. The stock has been very cheap for a while and might continue to stay cheap for some time.Nevertheless, we will still rate Alibaba as a strong buy as it is simply too cheap to ignore and the risk/reward is simply too exciting to ignore.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":17,"commentSize":2,"repostSize":1,"favoriteSize":3,"likeStatus":false,"favoriteStatus":false}}