To The Moon

Hopes are high on $Alibaba(BABA)$ ’s earnings slated to be released before US market opens tonight, after its peers $JD.com(JD)$ and Tencent reported results that had exceeded market expectations. Alibaba and JD are the two largest Chinese e-commerce companies typically benchmarked against each other, though their business models are essentially distinct from one another. Alibaba offers third-party platforms for consumer-to-consumer and business-to-consumer on-line transactions, whereas JD derives most of its revenue from its first-party marketplace by maintaining its own inventory and selling direct to consumers, not unlike Amazon does. By virtue of not having to maintain its own inventory of merchandise, Alibaba’s operating margin is considerably higher than that of JD. Furthermore, Alibaba has a more diversified business empire, including its fledgling Alibaba Cloud that is poised to contribute more significantly to its parent’s earnings. Hence, Alibaba’s results may not reflect those announced of JD. I expect Alibaba’s e-commerce business to post modest growth given heightened consumers' consciousness on discretionary spendings amidst a sticky inflation and looming recession. Nevertheless, advertising fees to promote listings on its e-Commerce platforms should help to mitigate some slowdown in spending. On the other hand, with the Chinese economy re-opening and global trend towards automation of operations and digitisation of businesses, I expect Alibaba Cloud business to gain traction domestically and give its larger competitors the likes of $Amazon.com(AMZN)$ , $Microsoft(MSFT)$ and $Alphabet(GOOG)$ a run for their money. Recent easing of the clampdown on the tech sector has also renewed innovations in the sector. Nevertheless, unless there is a significant and sustainable consumption-led pickup in the Chinese economy, I expect Alibaba’s performance to remain subdued in the near term. With higher interest rates to rein in the stubbornly high inflation, rising geopolitical tensions and an impending global recession, there may be more headwinds before Alibaba regains its past glory. @TigerWire @MillionaireTiger @CaptainTiger @TigerStars @TigerEvents