![]() Sooner or later, investors will detach themselves emotionally and the weight of opportunity cost will cause sentiment to shift. ![]() The opportunity in China is simply too big to ignore. We believe investor sentiment on China, and therefore Alibaba, will inevitably change for the better. Meanwhile, the immediate risk of Alibaba being delisted, one of the key risks that worries investors, has reduced following the deal agreed between the PCAOB and regulators in China late in August. While that is not a significant fall in isolation, it is from a level where Alibaba was already available at a significant discount. Since our recent analysis, Alibaba’s share price has fallen by a further 10%. Situations like these provide ideal contrarian opportunities. Much of that appears to be driven by emotion and fear, rather than a rational analysis of the situation. The negativity towards China appears to be prevalent across the West, but particularly so in the U.S. The reason for Alibaba being out of favor then has little to do with the fundamentals of its businesses, but rather the permanent negativity among investors regarding China. It operates the world’s largest e-commerce platforms, generates massive free cash flow, earns reasonable returns on capital even at a time when earnings are depressed, and is effectively debt free - among many other positives. There is little not to like about the Alibaba as a business. When a business with the characteristics of Alibaba is available at 7 times owner earnings, there is no doubt it is out of favor with the market. Developments since our article highlight why we not only consider it a “buy”, but one of the best contrarian investment opportunities available today.Ĭontrarian investing means holding a view which is out of favor with the market. In our in-depth analysis of Alibaba in August this year, we rated it as a buy at $92. Being a contrarian isn’t the key, but being a crowd follower isn’t either. The cross-border platform environment has become more intensely competitive with the emergence of PDD Holdings-owned (PDD.O) Temu.Don’t get caught up with what other people are doing. Analysts had predicted that strong international growth might help Alibaba offset a tepid domestic market. ![]() While the industrial and the retail sectors have performed better than expected, the crisis-hit property sector has weighed on consumer confidence.Ĭustomer management revenue from Alibaba's commerce retail, which tracks how much money merchants provide Alibaba for placements and promotions, grew 3% year-on-year.Īlibaba asked merchants to price aggressively during the country's Singles Day festival taking on competitors such as Douyin and PDD Holdings' (PDD.O) Pinduoduo which have been selling lower-cost products year-round.Īlibaba International Digital Commerce, a business that includes platforms such as Lazada and AliExpress, however reported a 53% rise in revenues, with retail revenue up 73% year-on-year. ![]() EARNINGS IN LINEĪlibaba reported second-quarter revenue of 224.79 billion yuan ($31.01 billion), in line with the 224.32 billion expected by analysts, LSEG data showed.Ĭhina's economic recovery has been uneven. In September, he told staff that the tech giant's two main strategic focuses going forward will be "user first" and "AI-driven". They will also invest in and incubate innovative businesses for the future, he added, naming four units, including work communication and collaboration platform DingTalk and second-hand goods platform Xianyu as ones that will be allowed to operate as independent subsidiaries. "As for the non-core businesses, we will realise the value of these assets by turning them profitable as soon as possible or through other means of capitalisation." The Alibaba restructuring broke it up into six units, managed by the group as a holding firm. "Core businesses are where we will keep our long-term focus, intensively invest resources, pursue R&D, enhance user experience," he said. Wu, presenting Alibaba's earnings for the first time on the call, also detailed its future strategy, saying that each of its businesses would face the market more independently and that they would conduct a strategic review to distinguish between "core" and "non-core" businesses. Regulatory filings also revealed on Thursday that Ma's family trust plans to sell 10 million American Depository Shares of Alibaba Group Holdings for about $871 million. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |