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BABA

Alibaba Group Holding NYSE:BABA Stock Report

Last Price

US$90.74

Market Cap

US$240.2b

7D

-4.4%

1Y

-43.5%

Updated

18 Aug, 2022

Data

Company Financials +
BABA fundamental analysis
Snowflake Score
Valuation4/6
Future Growth3/6
Past Performance1/6
Financial Health6/6
Dividends0/6

BABA Stock Overview

Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally.

Alibaba Group Holding Limited Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Alibaba Group Holding
Historical stock prices
Current Share PriceUS$90.74
52 Week HighUS$182.09
52 Week LowUS$73.28
Beta0.58
1 Month Change-13.38%
3 Month Change4.55%
1 Year Change-43.48%
3 Year Change-47.22%
5 Year Change-48.15%
Change since IPO-3.36%

Recent News & Updates

Aug 16

Alibaba: It Ain't The Delisting, It Is Still The Bubble

Chinese shares are now in a fresh round of delisting tremors. This appears to be the real deal and investors are once again worried about the impact. The real issue with the underperformance though, has nothing to do with the delisting. Alibaba could easily drop another 30% from here and investors should use prudence in establishing positions. Back in November of last year, we saw Alibaba Group Holding Limited (BABA) as a play positioned at the junction of value and growth. The best of both worlds. We chose to resist the temptation to go long however, as we felt BABA had a bumpy road ahead with the implosion of its home country's mega real estate bubble. The valuation was getting compelling on a price-to-sales basis, we still chose to remain on the sidelines back in May and provided our reasoning. But in a deflating real estate environment, with spiraling costs, nothing stops this from heading lower to 1.5X or lower. The earnings will always make it look cheap at whatever price you check it at, but they are destined to go lower. We think the upcoming conference call will once again reiterate the challenges of retail when real estate drops and energy pops. We think the stock will remain range-bound until the earnings picture improves. Source: Bears Have Been Dead On Target The stock price soared after its Q4 results but settled to a level only a tad higher since our last piece. BABA data by YCharts Recent market focus has been on a potential delisting as many Chinese firms are already going that route. PetroChina Co. (PTR) dropped 3.4% in Hong Kong, while China Life Insurance Co. (LFC) and China Petroleum & Chemical Corp. (SNP) lost more than 2% each. Sinopec Shanghai Petrochemical Co Ltd. and Aluminum Corp of China Ltd. (ACH) also fell. The rush to leave the US market was seen as reflecting rising bilateral tension and a lack of progress in reaching agreement over giving American regulators better access to Chinese firms’ financial data. Source: Bloomberg BABA obviously has been in the rumor mill as it has faced numerous questions over its audit standards. Meanwhile, the analysts continue to vigorously fine tune their estimates for this giant. Seeking Alpha Let's review the results that have been released since we last wrote on this retail giant and provide an update to our outlook. June 2022 Results-Growth Be Gone If we move past the analyst estimates, we can appreciate just how rough these numbers were for the former growth darling. BABA Results Revenue flatlined and operating margins dropped by about 20%. Adjusted EBITDA was also lower and net income was cut in half. These numbers were despite the Cloud segment still managing to pull a 10% growth rate year over year. The stock actually rose on the news and that was of course due to estimates being lowered enough for a "beat". Outlook If there is one hill analysts will die on, it will be their collective refusal to ever price in a recession. Hence earnings will have only a single direction. Up. In the case of BABA, the first quarter did jolt them to price an earnings decline, but there on, again it is onwards and upwards. Seeking Alpha While anything is possible, China currently faces one of the most challenging environments it ever has. We are not even referring to the self imposed and self inflicted "Zero-Covid" policy. We are referring to the collapse of the largest bubble known to mankind. Goldman Sachs In our last coverage, we showed that the leading indicators of forward sales looked grim. Goldman Sachs Well guess what? Those leading indicators were completely accurate. China floor space started has now collapsed to 2009 levels. Pictet Asset Management The run rate is now approaching the worst point of COVID-19 for the country. Is this coming from the Zero COVID policy? Yes, there is definitely some contribution, but the bulk is coming from the bubble going kaput. China built and built to power their GDP and all the animals (not just the chickens) are coming home to roost. Fifty million empty flats threaten to plunge China’s troubled property market further into crisis, warns think tank The average vacancy rate in mainland China is 12.1 per cent, according to BRI, meaning millions of empty units could flood the market Now the property boom is over, the unoccupied homes are beginning to feel like a burden for their anxious owners

Aug 10

Alibaba: More Bad News

Alibaba's shares are trading at seemingly attractive valuation multiples but investors shouldn't fall into the trap. Prospects for investing in Alibaba have significantly deteriorated in recent weeks. Risk-averse investors may want to avoid the stock for the time being. Alibaba's (BABA) (OTCPK:BABAF) shares are down over 50% in the last year and many investors are getting tempted to buy. The general rationale is that the stock has fallen enough already and that it should only rally on from here on out. While that might have been a compelling contrarian argument till a few weeks ago, it's now rife with problems, speculation and stretched assumptions. In this article, I'll explain why investors may want to avoid the value trap that Alibaba is gradually turning out to be. Let's take a closer look at it all. The Valuation Misconception Let me start by saying that Alibaba's shares are trading at just 2.1-times its trailing twelve-month sales. This is quite low, especially when considering that the stock used to trade at over 24-times its sales back in 2015. Given this steep discount compared to its own prior levels, contrarian investors have been arguing that the stock is attractively valued and that it doesn't have much downside potential left from current levels. While that sounds like a compelling argument, the problem here is that industry comparables are trading at even more attractive multiples. The chart below should put things in perspective. The X-axis plots the Price-to-Sales (or P/S) multiples for over 25 internet retail stocks that are listed on US bourses. Note how Alibaba is horizontally positioned slightly towards the right, indicating that its trading at levels that are marginally higher than the industry average. BusinessQuant.com Now, let's shift attention to the Y-axis, which plots the revenue growth rates for the same set of companies. Note how Alibaba is vertically positioned much lower than a broad swath of its other listed peers. This suggests that the stock is valued slightly higher than the industry average but its revenue growth rate is lower than most its peers in general. This implies that Alibaba's shares have room to correct further, in order to justify its subpar growth rate. There are at least 14 other stocks classified in the internet retail industry, that are growing faster than Alibaba but trading at lower P/S multiples. This disparity is all the more prominent when we consider that Alibaba's US-listed shares offer an ownership only in a shell company floated in Cayman Islands, whereas its other attractively-priced US-based peers offer ownership in actual companies. Because of this difference in the nature of securities, Alibaba's shares should ideally be trading at a discount compared to its US-based peers in the first place, but it's actually trading at a slight premium instead. This should encourage contrarian investors to reconsider their thesis for the e-commerce giant. The Growth Slowdown Moving on, the Chinese government hasn't hiked its interest rates in recent months, unlike the US. This suggests the Chinese economy will continue growing at a relatively faster pace and companies operating there should, at least in theory, thrive while other global economies stagnate and/or go into recession. This industry tailwind should indeed boost Alibaba's growth prospects and it's admittedly a silver lining in the whole contrarian narrative. But there's a problem here as well. A number of macroeconomic issues relating to China have come to light in recent weeks: Chinese house owners are refusing to pay mortgage payments which is likely to trigger a banking crisis in China, China has escalated its military drills around Taiwan and it's anyone's best guess if it's going to be yet another invasion, A banking fraud in China resulted in customer accounts being frozen, stoking fears of a widespread credit crisis. In light of these events, consumer confidence in China has taken a hit and it's likely to hinder consumer spending in Q3. This may very well trigger a more profound slowdown for Alibaba and other similarly positioned Chinese e-commerce companies, negating the positives of low interest rates in the country. This is gradually reflecting in the Street's forecasts - note how analysts have been gradually lowering their revenue estimates for the company in nearly every passing week. Ycharts This deteriorating macroeconomic environment in China should again encourage investors to rethink their rationale for Alibaba. The Delisting Risk Lastly, contrarian investors are hopeful that delisting fears pertaining to Alibaba are exaggerated and not really a matter of concern. However, the risk is very real. The SEC published a yet another list about 10 days ago, noting that Alibaba and 270 other Chinese companies will be forcefully delisted from US bourses if they don't open up for audit inspections. Chinese regulators had reassured investors earlier this year that they're going to work with the SEC and comply with their audit requirements, in order to prevent mass delisting of Chinese stocks from US bourses. But I've been warning investors that the regulators haven't been making any progress and the risk remains. The prospect of such progress seems even more unlikely now, considering how diplomatic relations between the US and China have rapidly deteriorated over the past week.

Aug 05
Undervalued and Risky - Why Alibaba's (NYSE:BABA) Situation is Getting more Complicated

Undervalued and Risky - Why Alibaba's (NYSE:BABA) Situation is Getting more Complicated

Alibaba Group Holding Limited (NYSE:BABA) just released the latest earnings report for the quarter ending on June 30th, showing a noticeable business slowdown based on decreased commerce activity in China. In this analysis, we will pair the risk factors for Alibaba with the fundamentals in order to see if the market is skewed in any direction.

Aug 03

Alibaba Should Head Much Higher

Alibaba is going through another round of selling. However, Jack Ma's step away from Ant Group is likely positive, and the delisting fears are overblown. Alibaba is drastically undervalued, and the stock price should go much higher as the uncertainty fades. Alibaba's (BABA) stock is getting hammered again. Shares are back below $90 as investors fret about growing delisting concerns and Jack Ma giving up control of Ant Group. Additionally, Alibaba's earnings are coming up in August, and analysts expect the company to report its first quarterly revenue decline. Moreover, investors fear the earnings results could be worse than expected. Thus, Alibaba is being punished, with shares down by 30% from their high in early July. Meanwhile, Alibaba's valuation is remarkably low, and the stock is extremely cheap. Earnings and earnings estimates are probably around the bottom here. Moreover, the delisting concerns seem exaggerated, and the Jack Ma/Ant Group controversy appears overblown. The renewed uncertainty is leading to fear and panic selling in Alibaba shares. While owning Alibaba is an elevated-risk investment, the potential reward greatly outweighs the risks, in my view. Alibaba should return to growth and increase profitability in the coming years. Furthermore, the delisting fears should subside, and the Ant IPO should occur as the company advances. Additionally, Alibaba's earnings next month have a significant probability of coming in better than expected. Therefore, the uncertainty should clear as we move, and Alibaba may become one of the top-performing long-term investments for the next decade. Here We Go Again BABA (StockCharts.com) Just when it appeared like Alibaba got its footing back, the stock dropped again. This time the decline occurred from a near-term top of around $125, bringing the share price lower by approximately 30% inside one month. The fall was about 70% from Alibaba's ATH of roughly $320 in late 2020. So, Where to Now? We see Alibaba trading sideways recently (last six months or so), and the trading range is roughly $80 - 125. Therefore, we could see slightly more downside (to about $80) in the near term. Yet, it is constructive that Alibaba stopped making new lows. Also, we see the RSI and other technical gauges illustrating oversold conditions. Therefore, the downside may be limited here, and there is a strong probability that Alibaba will soon bounce back from the oversold technical levels. On the upside, we want the stock to return above $100, then break out above the $125 critical resistance point. Once above this crucial resistance level, Alibaba could start a new uptrend during which shares could rise to new highs. However, for new highs to materialize, we need several fundamental factors to go right. The Delisting Fears Need to Go Away Last Friday, Alibaba dropped by 10% as the SEC added the Chinese retail giant to their list of companies facing possible delistings. Beijing has been hesitant to allow U.S. officials to look at the accounting books of company auditors, including Alibaba's. In 2020, a law was passed which gives companies a three-year window to abide by the SEC standards or face a possible delisting from U.S. exchanges. However, Alibaba said it would continue monitoring market developments and will strive to keep its listing status on the NYSE and the HKEX. While Alibaba's addition to the SEC's possible delisting watchlist is a negative development, we must consider several factors. First, we knew this law existed, and we should have concluded that Alibaba may be on this list of companies U.S. authorities want to audit. Second, there are around 270 companies on the list, including Baidu (BIDU), Weibo (WB), Yum China (YUMC), and many other major Chinese firms. In fact, 270 companies represent all Chinese companies that trade in the U.S. In May 2022, 261 Chinese companies were trading on U.S. exchanges with a combined market cap of $1.3 trillion. Therefore, Alibaba is not being singled out here, it is simply the norm to put Chinese companies on this watchlist, and we must see where it brings us in the end. Neither Alibaba nor the Chinese government is interested in seeing Alibaba and other major Chinese companies delisted from U.S. exchanges. Widespread delistings would be destructive to the Chinese economy and the country's image around the world. Moreover, delistings would set China's economic progress back decades, possibly leading to economic and civil unrest at home (the greatest fear of any authoritarian government). Therefore, Alibaba will probably do everything it needs to comply with the SEC's regulations to keep its listing in the U.S. Moreover, most Chinese companies should also do everything to comply. Furthermore, it is in the CCP's interest to support China's companies listed in the U.S. to maintain economic progress, stability, and social order. China has already removed some obstacles to enable its companies to comply with the SEC's standards and will probably do more as we move on. Also, we must remember that the law says three years of non-compliance before being considered for delisting. Alibaba was just put on this list, meaning in a worse-case outcome, the shares could be considered for delisting in around 2025. By then, the SEC and the Chinese government may have resolved all of the audit issues, and Alibaba's share price could be much higher. The Ant Group Incident Before the SEC's announcement regarding Alibaba's placement on the infamous watchlist, Alibaba's shares fell due to the Ant Group announcement. After about a year of pressure, Alibaba's founder Jack Ma is giving up "control" of Ant Group. Ant Group is the most prominent fintech company in China and possibly the world. The company operates AliPay, a payment app with over a billion users. There was also going to be a massive $37 billion Ant Group IPO, which would have valued the company at around $200-300 billion or more. However, that IPO got blocked by the CCP about a month after Jack Ma made some critical comments about the country's government and financial system. Now, Jack Ma controls about 50.5% of Ant Group's shares but will relinquish control by transferring some of his voting power to other Ant officials, including the company's CEO. However, Jack Ma stepping away from Ant's control is not a negative factor. Instead, it may be a very constructive development for Alibaba. Alibaba still owns a 33% stake in Ant Group. Jack Ma stepping away increases the chances of an Ant IPO, even if it comes a year or so down the line. We've already seen some reports that Beijing may give the nod to Ant Group soon, and an Ant IPO would be massive for Alibaba shareholders. Alibaba's market cap has dwindled to just around $240 billion recently. If the Ant IPO prices near the prior IPO's expectations, we could see Alibaba's share valued at $70 - 100 billion, implying that Alibaba's market cap minus Ant is just around $140 - 170 billion now, silly. What is Alibaba Worth? Let's look at the company's earnings and revenues to get an idea of what Alibaba is worth. EPS Estimates EPS (StockCharts.com) Alibaba is going through a transitory earnings decline phase. This year's EPS growth should be off by about 6% YoY (consensus estimates), but double-digit EPS growth should return after that. If we go by next year's consensus estimates, Alibaba is trading at a forward P/E of around ten. This valuation is relatively cheap, as comparable companies trade at much higher multiples. Amazon (AMZN) closely resembles Alibaba but trades at about 56 times next year's EPS estimates or about 5.5x Alibaba's valuation. Also, Alibaba's future EPS estimates are likely lowballed, and the company could earn much more in fiscal 2025 and beyond. Revenue Estimates Revenues (StockCharts.com) Regarding revenues, Alibaba is trading at about 1.75 times this year's consensus revenue estimates and about 1.55 times next year's forward sales. Therefore, we're looking at a 1.75-1.55 P/S valuation and expected revenue growth of approximately 8-12% in the coming years. Revenue estimates may also be lowballed here, and I suspect Alibaba could deliver growth of 10-15% as we advance. It isn't easy to compare Alibaba to Amazon on a P/S basis as the companies compute revenues differently. However, if we look at gross merchandise volume ((GMV)), Alibaba's was about double Amazon's in 2021, $1.2 trillion vs. $600 billion. GMV may be the most accurate way to assess an e-commerce platform's "revenues," and we see that Alibaba looks remarkably undervalued based on this metric.

Shareholder Returns

BABAUS Online RetailUS Market
7D-4.4%-0.5%1.4%
1Y-43.5%-23.4%-8.4%

Return vs Industry: BABA underperformed the US Online Retail industry which returned -25.2% over the past year.

Return vs Market: BABA underperformed the US Market which returned -9% over the past year.

Price Volatility

Is BABA's price volatile compared to industry and market?
BABA volatility
BABA Average Weekly Movement10.4%
Online Retail Industry Average Movement12.2%
Market Average Movement7.6%
10% most volatile stocks in US Market17.1%
10% least volatile stocks in US Market3.1%

Stable Share Price: BABA is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 10% a week.

Volatility Over Time: BABA's weekly volatility (10%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
1999245,700Daniel Zhanghttps://www.alibabagroup.com

Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally. The company operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others. It operates Taobao Marketplace, a social commerce platform; Tmall, a third-party online and mobile commerce platform for brands and retailers; Alimama, a monetization platform; 1688.com and Alibaba.com, which are online wholesale marketplaces; AliExpress, a retail marketplace; Lazada, Trendyol, and Daraz that are e-commerce platforms; Freshippo, a self-operated retail chain; and Tmall Global, an import e-commerce platform.

Alibaba Group Holding Limited Fundamentals Summary

How do Alibaba Group Holding's earnings and revenue compare to its market cap?
BABA fundamental statistics
Market CapUS$240.24b
Earnings (TTM)US$5.83b
Revenue (TTM)US$125.68b

41.2x

P/E Ratio

1.9x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
BABA income statement (TTM)
RevenueCN¥852.88b
Cost of RevenueCN¥544.27b
Gross ProfitCN¥308.61b
Other ExpensesCN¥269.06b
EarningsCN¥39.56b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)14.94
Gross Margin36.18%
Net Profit Margin4.64%
Debt/Equity Ratio14.0%

How did BABA perform over the long term?

See historical performance and comparison