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BABA

Alibaba Group Holding NYSE:BABA Stock Report

Last Price

US$79.99

Market Cap

US$211.8b

7D

1.5%

1Y

-44.5%

Updated

30 Sep, 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$79.99
52 Week HighUS$182.09
52 Week LowUS$73.28
Beta0.55
1 Month Change-16.16%
3 Month Change-31.04%
1 Year Change-44.53%
3 Year Change-53.04%
5 Year Change-55.36%
Change since IPO-14.80%

Recent News & Updates

Sep 26

Alibaba: Nothing Positive Left

Summary Alibaba's shareholders have had nothing but pain from their investment in the past year. In fact, the stock today is very close to its IPO price back in 2014. I put a spotlight on Alibaba's capital allocation strategy. Close to $10 billion in repurchases out the window, and what did it actually bring? Alibaba's share count has started to trickle lower and is down 3% y/y. Meanwhile, analysts continue to get bearish on Alibaba. Is now too late? Alibaba is priced at around 11x this year's depressed EPS figures. How to think about this valuation. Investment Thesis Alibaba (BABA) is down all the way to its IPO price of $68. That is how little hope the stock now holds. After 8 long years, shareholders have seen nothing but pain and misery. Throughout fiscal 2022 (ended March 2022), Alibaba deployed nearly $10 billion to buy back its stock. Repurchases were made at a share price that's at least 100% higher than today. Was it a waste of capital? Sometimes, spending capital looks one way on the surface, but it delivers quite another set of intangibles that aren't immediately obvious. By my estimates, Alibaba is priced at 11x this year's non-GAAP EPS figures. This really prices in a lot of negativity. What's Going On? I find it fascinating to watch investors' sentiments towards China oscillate over time. A fascinating case study in and of itself. Even Charlie Munger's moves into and out of the stock have been worth studying. It's a movie that's enthralling, with the final credits still many years away. For their part, the Chinese government has decidedly stepped back to lessen its hold over the financials of Chinese companies. Nevertheless, this hasn't stopped a massive slide in its share price. Today, it's difficult to imagine a scenario where anyone but the nimblest of investors has made any return from Alibaba. Capital Allocation Strategy, Was It a Failure? During fiscal 2022 (ended March 2022), Alibaba deployed $9.6 billion to repurchase shares at approximately $160 per share. Then, in fiscal Q1 2023, Alibaba deployed a further $3.5 billion to repurchase at approximately $90 per share. With the share price today at $78 and showing no signs of abating its sell-off anytime soon, it's easy to point a figure at what today can be seen as a waste of resources. But was it a failure? I don't know if one can answer this question so easily. Obviously that capital deployed throughout fiscal 2022 accounted for nearly 5% of its market cap today, and that only provided returns to shareholders looking to exit the stock. On the other hand, nobody could have predicted the swings in China's underlying economy. Could anyone have foreseen that China would be aggressively embracing yet another set of lockdowns, with such questionable results? Perhaps, it could be argued, that even though those repurchases were clearly mistimed, they showed something else. The repurchases show investors that not only Alibaba is a strong free cash flow generating company. But also, that it's intent on bringing down its share count. Note, as of fiscal Q1 2023, its shares outstanding are down 3% y/y. Meanwhile, how many tech companies in the US make proclamations about buying back their shares to mitigate ''employee dilution'', only for investors to see the number of shares increase over time? BABA Stock Valuation -- 11x This Year's EPS Consider the following table. Analysts downwards revised EPS consensus In the past several months, analysts' estimates have been moving in one straight line. Analysts are resolutely downwards revising Alibaba's EPS figures. It has got to the point that analysts can't expect anything positive to come out of Alibaba for years to come. Could it be that analysts are now too bearish? It could be the case that Alibaba's EPS figure for fiscal 2023 could come down below $7.10. That's possible. Alibaba's non-GAAP EPS could even end up at $7 per share. But even in that case, investors are paying 11x this year's non-GAAP EPS. In the US, there are still today, despite the unrelenting bear market cloud companies priced at 10x forward sales. While in cybersecurity names, getting anything below 12x forward sales is considered a bargain.

Sep 19

Alibaba And Tencent: Reminiscent Of Google In 2009

Summary Within the shadows of geopolitical fears and a looming real estate collapse lie the deeply discounted empires of Alibaba and Tencent. BABA and TCEHY are comparable to Google in 2009. Is a 10x in the cards? Chinese citizens are structurally underinvested in stocks, but that’s about to change. In the decade ahead, we project returns of 20% and 18% per annum for Alibaba and Tencent. The Thesis While the risks are undeniable, the reward appears to justify an allocation to Alibaba Group Holding Limited (BABA, [[BABAF]]) and Tencent Holdings Limited (TCEHY, [[TCTZF]]). These stocks look a lot like Alphabet Inc. ([[GOOG]], GOOGL) ("Google") in 2009. We'll dig into why this opportunity exists, analyzing the macro uncertainties and geopolitical risks. While this is not for the faint of heart, it often pays to "buy when there's blood in the streets." As Cheap As Google In 2009? 2022, Tencent 2022, Alibaba 2009, Google P/E Ratio 13.1 11.8 11.6 Price To Sales 4.2 1.8 2.2 Price To Book 3.2 1.6 3.4 Return On Equity (ROE) 22% 13% 16% Net Margin 32% 15% 19% Note: Used forward estimates for Alibaba's PE, ROE, and Net Margin to adjust for significant asset write-downs and other non-cash items. Image created by author with data from YCharts. As you can see, Tencent is valued at a premium to Google in 2009, and Alibaba is valued at a discount to Google in 2009. However, Google was an inferior business to Tencent on a profitability basis and a superior business to Alibaba on the same metrics (Net Margin & ROE). In 2009, the American financial system appeared to be melting down. Businesses and households were capitulating and entering bankruptcy, while major banks like Lehman Brothers went under. A domino effect could have been set off if the federal reserve had not stepped in. This caused Google, a company with extremely strong fundamentals, to trade at such a depressed level that it went on to 10x over the decade ahead. Likewise, in 2022, the real estate bubble in China appears to be slowing imploding. Many estimate that China's enormous property developer, Evergrande Group could also go under. Not unlike the United States in 2008, Chinese citizens are heavily invested in real estate, and structurally underinvested in stocks. In fact, Chinese residential real estate is currently the world's largest asset class: Global Asset Classes (New Money) With Alibaba and others targeting a primary listing in Hong Kong, Chinese citizens will be able to trade its shares domestically for the first time. Like the U.S. over the past decade, we expect more and more Chinese capital to flow into the equity market. Consumption should also resume in the country, coming out of a difficult period of COVID-19 lockdowns and economic troubles. All of this should be a boon for the shares of Tencent and Alibaba. Deep Economic Moats While Tencent and Alibaba enjoy market leading positions in China within industries like gaming (Tencent) and the cloud (Alibaba), we believe each of these businesses has a key asset, which ties everything else together. For Tencent, that asset is WeChat and for Alibaba, that asset is Taoboa. WeChat could be the most dominant mobile app in the world; it's a super-app that encompasses Chinese social media, messaging, and mobile payments. While Alibaba's Alipay is a strong rival in mobile payments, WeChat is essentially the king in messaging and social media with 1.24 billion users. This is an exceptionally strong advertising avenue for Tencent. The company can boost its investees by pushing products on the app. Famed investor Mohnish Pabrai described WeChat as a "bazooka" that Tencent can fire at its competition. Alibaba's Taoboa has a similar network effect. Taoboa is the number one shopping platform in China. Combined with Alibaba's other commerce avenues, the company reaches more than 900 million consumers in China. Its brands are intertwined with businesses throughout the country, and entrenched in the minds of consumers. This allows Alibaba to sell advertising, cloud services, and premium memberships, while "making is easy to do business anywhere." Consumers in the Alibaba ecosystem enjoy the convenience of services like Ele.me delivery, Amap navigation, and Alipay mobile payments. Charlie Munger's lollapalooza effect applies to Taobao's shopping experience, which encompasses a great product, powerful stimulants, availability, clever marketing, and social proof. Tencent and Alibaba's economic moats are evident in their revenue growth: BABA Revenue ((TTM)) data by YCharts Over the past 8 years, Alibaba has grown its revenue at 35% per annum and Tencent at 23% per annum, all the while maintaining strong balance sheets. Fear And Uncertainty When it comes to Alibaba and Tencent, the discount exists not only due to economic hardship in China, but due to fear and uncertainty surrounding the geopolitical landscape. When Russia invaded Ukraine, sanctions were used as a deterrent. Russian stocks were barred from trading on many international exchanges. Recent tensions in the Taiwan Strait have caused many to fear war between China and Taiwan. Between this, the VIE structure, and China's CCP, the risks stretch far beyond internal operations. Just because these are financially and competitively resilient companies doesn't mean the stocks can't go to zero. Investors must weigh this risk appropriately within a diversified portfolio, more on this latter. The Valuation Tencent has a lot of investees; its equity portfolio is said to be worth $88 billion. Tencent is an early-stage investor, and its portfolio was once worth much more. The equity holdings had a lot of exposure to unprofitable tech, which melted down over the past year. Still, Tencent's portfolio represents 25% of its market cap. We suspect the equity portfolio is now closer to fair value as the excess drains out of the tech sector, especially in China.

Sep 13

Alibaba's Jittery Fakeout Explained (Technical Analysis)

Summary Latest earnings came in better than expected for Alibaba. There are a few different factors that are stalling a bullish third wave. An initial attempt in June resulted in a fakeout, but price has still stayed above the recent low of $73. We will examine all factors facing Alibaba that may have its share price stagnating and go through all the technicals looking for a second attempt at a breakout. As we're all coughing from the latest dust created by equity markets stomping their hooves in a second attempt at bullish aggression, Alibaba Group Holding Limited's (NYSE:BABA, OTCPK:BABAF) fortunes don't immediately appear that bullish. However, Alibaba has formed a wave one two pattern complex, albeit at the moment price is languishing in the lower to mid echelons of the structure, perhaps still recovering from its third wave fakeout and both recent and current headwinds. With tens of millions still under strict lockdown in China as regions are still trying to contain outbreaks of Covid 19, Alibaba is also still perhaps staring at the battle-ready equity heavyweights while it nurses a few wounds. This year's Q2 earnings came with a revenue beat, but growth flatlined for the first time in the company's history, undoubtedly affected by supply chain issues along with the strict regulatory requirements enforced by Beijing for over a year and half while the crackdown on the domestic technology sector continues. One must also wonder if Chinese planes carrying out military drills around Taiwan added to investor indecision. Alibaba still remains an e-commerce giant and has technically set up a Bullish formation, so we will move to the charts to look at the current wave structure, including the fakeout, and dissect a resistance level and target. Alibaba current macro structure. Monthly chart (C Trader ) We can see on the monthly chart above the far left bullish candle that spans the length of the whole wave one. This candle has a low of $73 and high of $124 and has technically seen a very protracted wave two that has effectively gone sideways for months. In June, price broke ever so slightly above the previous resistance leading to a technical fakeout by turning extremely bearish, however price has not been carried outside the low of $73. So, a nervy time aside for those who entered a bullish trade at the resistance break point, price has held up reasonably well and is technically still primed to break out higher. It is one of the old famous trading questions, to let a market run a bit higher to lower the probability of a fakeout once resistance has been broken or to take the trade immediately a pip above the point of breakout. If you chose the latter, a case like this would be quite nervy to say the least, if you chose the former you'd be still lying in wait rent-free for a better opportunity. Alternatively, waiting for a market to go a little higher before entry is pips missed as a third wave completes... go figure. So we can see the wave one $73-$124 and sideways wave two $124-$76. Often when price is condensed between two ranges particularly that aren't very far apart and is forced to go sideways as it tests areas between support and resistance, this can be seen to be very bullish if it were to break out upwards obviously. The third wave should it break above $124 would be due to land at $175 for a numerical replication of wave one which we have technically printed. As price has been condensed for so long, we will also examine the other Fibonacci levels in case of a large bullish move to cover the possibility of a price explosion because of the squeeze. Alibaba monthly with extended Fibonacci levels (C Trader ) Above the continuation, possible Fibonacci levels are outlined with $206 and $289 further targets should Alibaba continue through the wave patterns if the third wave does break out. Below is the weekly chart that magnifies how the pattern is forming on the monthly. Alibaba weekly (C Trader ) We can see above on the left hand side that a very bullish set of weekly candles were then nearly matched by a set of bearish candles, although price did stay above the low. It was only as this pattern set in the middle of the chart that we can see two three wave patterns on the weekly chart that actually led to the fake out with current price trying to find bullish traction.

Sep 09
Some Investors May Be Worried About Alibaba Group Holding's (NYSE:BABA) Returns On Capital

Some Investors May Be Worried About Alibaba Group Holding's (NYSE:BABA) Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to...

Sep 04

Alibaba: Short-Term Trading Strategy

Summary Over the last 5 days, the market has reached a consensus of sorts on Alibaba's valuation; its value is somewhere between $90.78 and $100.88/share. Alibaba has repeatedly traded at high volumes near both value extremes in the last 5 days, sometimes on the same day. Alibaba's volatility makes it a great stock for a short-term day or swing trading. Money in losing positions is often called "dead money". However short-term trading around a losing position can, if executed successfully, lower a position's cost basis and generate return.

Aug 29

The U.S.-China PCAOB Agreement Can't Save Alibaba, Yet

Summary Chinese regulatory risks hit a significant milestone Friday after the PCAOB reached an agreement with Chinese regulators on conducting independent audit inspections in the region. While the latest development was thought to be the long-awaited key to unlocking Alibaba's valuation prospects, the stock's short-lived rally indicates that investors are looking for much more. The following will provide a detailed overview of the HFCAA and PCAOB inspections, and their impacts on Alibaba to gauge why the latest protocol has failed to lift the stock. The Alibaba stock (BABA) has yet to stage a sustained rally despite positive developments to one of its most prominent downside risks - namely, delisting - in recent weeks. Instead, it has become a constituent in the constant "tug-of-war" between gradual uptrends on positive news developments and violent declines on the first hints of weakness, with neither side staging a clear win. The recent trend of short-lived gains and losses underscores investors' angst over the Alibaba stock's outlook still, despite greater clarity today on regulatory and macro headwinds compared to a year ago when the slump in U.S.-listed Chinese equities first began. Adding to our ongoing series of coverage on the stock, the following analysis will zero-in on what PCAOB inspections are, how they impact Alibaba, and what the latest protocol agreed between associated regulators - namely the CSRC, SEC and the PCAOB - mean for the shares' valuation outlook in the NYSE. What is HFCAA and How Does it Impact Alibaba? Building on some of the response received from our recent coverage on Chinese equities, there seems to be confusion around the delisting risks facing Alibaba still, with some investors believing that corporate management has a say in the evolving situation. However, it is important to understand that no matter how committed management is today with ensuring their listing in the U.S. stays active, the ultimate decision lies in the hands of both the Chinese and U.S. regulators - primarily the CSRC, SEC and the PCAOB. The "Holding Foreign Companies Accountable Act" ("HFCAA") signed into law in December 2020 was put in place to counter Beijing's ongoing deflection of mandatory PCAOB inspections on corporate audits in mainland China and Hong Kong. Under the HFCAA, publicly listed companies that have engaged an auditor in a non-U.S. jurisdiction that fails to comply with PCAOB audit inspection requests will be delisted from American exchanges "after three consecutive years of being identified". Today, only public auditors in mainland China and Hong Kong, which provides public accounting services to more than 160 publicly listed companies on U.S. exchanges, have failed to cooperate with PCAOB inspection requests. For Alibaba, which was added to the SEC's rolling list of "commission-identified issuers" on August 22, 2022 for engaging a non-compliant public accounting firm for its annual financial audits, the company has until August 22, 2025 for its auditor (PricewaterhouseCoopers Hong Kong) to conform with the PCAOB's inspection requests to prevent removal from the NYSE. Despite the recent preliminary agreement reached between the SEC, PCAOB, CSRC and Ministry of Finance of the PRC (explained in detail in later sections), Alibaba's valuation discount (further explained here) to its American counterparts with similar growth profiles reflects the prominence of delisting risks still - investors remain on edge about how the latest development will unfold, underscoring the long road ahead to rebuild the stock's regulatory credibility. And although Alibaba has paved one of the most attractive "next best options" for shareholders of its ADRs in the unlikely event of delisting from the NYSE, which permits the conversion of shares through its secondary listings on the HKSE that will later transition into a primary listing by year-end, the stock has yet to unlock greater upsides that are reflective of its fundamental growth profile. This is largely due to the difference in valuation advantages between the Asian and American stock markets, which we have discussed in previous coverages: Although Alibaba's listing on the Hong Kong Stock Exchange provides partial insulation from the SEC-imposed delisting risks by allowing an option to convert ADRs for Hong Kong-listed shares, it remains a less attractive option. The Asian exchange's "less active and liquid markets" has two times less turnover on average compared to American exchanges, resulting in relatively mediocre valuation prospects compared to those of counterparts listed on the NYSE/Nasdaq… While Alibaba's recent plans to pursue a primary listing in Hong Kong would open the door to incremental capital from mainland investors, related trading volumes remain a far cry from those in the U.S. - the average daily trading volume for Alibaba stocks in Hong Kong last month was about $700 million, compared to about $3.2 billion in the U.S. Source: "Alibaba Stock: Does China's Monetary Easing Offset the Regulatory Risks?" and "Alibaba is Still Not a Buy, Here's Why" What are PCAOB Inspections and How Do they Apply to Alibaba? PCAOB inspections typically target 1) the public accounting firm performing the audit, and 2) the engagement that has been selected for evaluation - it is essentially as an "audit of an audit": 1. Targeting the Public Accounting Firm One reason for regular PCAOB inspections is to ensure public auditors have complied with GAAP rules in performing the audit of their clients' respective financial information to ensure they are free from material misstatement whether due to error or fraud. Public accounting firms that provide an audit opinion for more than 100 publicly-listed companies are inspected by the PCAOB annually - these typically include the widely known firms such as Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers. Meanwhile, smaller public accounting firms that provide audit opinions to less than 100 issuers are inspected once every three years. Special PCAOB inspections are also carried from time to time, and could target the audit engagements of a specific audit partner and/or industry group. For Alibaba, this means its auditor - PricewaterhouseCoopers Hong Kong - will need to comply with PCAOB inspection requests and come out clean with no material findings to minimize repercussions on the stock's long-term valuation prospects. 2. Targeting the Issuer The selection process for specific audit engagements subject to PCAOB inspections combines "risk-based and random methods". This essentially means audit engagements that exhibit a higher risk of material misstatement typically have a higher chance of getting selected for inspection. These include audits for issuers that are exposed to significant accounting estimates that require judgement (e.g. asset revaluation; share-based compensation revaluation), and material revenues (revenue recognition is deemed a default significant and fraud risk item under GAAP rules except under extraordinary circumstances), which Alibaba checks the boxes for. As one of the largest publicly listed companies in the U.S. with complex operations across multiple industries and geographic regions, Alibaba fits the bill for a high-risk engagement that potentially puts it higher on the PCAOB's inspection watchlist compared to smaller businesses with a more straightforward business model (e.g. a single revenue-stream business earning fixed contracted revenues that can be easily substantiated). However, the volume of audit inspections that the PCAOB decides to proceed with for the selected public accounting firm varies, again, based on risk factors considered. For instance, U.S.-listed Chinese stocks may be subject to greater inspection frequency and volume on an annual basis once the CSRC gives the full green light, considering the higher audit risk of inaugural inspections. Firms that were subject to higher reporting perils due to COVID disruptions, such as those exposed to significant collection risks, might have also been a prime cohort within the PCAOB's attention during the 2019-2020 inspection years. For now, the PCAOB has yet to release any detail on whether or how it will conduct inspections on U.S.-listed Chinese companies found in the commission-identified issuers list, other than the fact that it will get the ball rolling by mid-September. Essentially, PCAOB inspections target both the audit firm and specific audit engagements. However, U.S.-listed Chinese equities are potential victims to HFCAA primarily because of their auditors' non-compliant status with PCAOB inspection requests under the Chinese government's previous orders. This means the only way to dodge HFCAA delisting risks completely today is to switch to a registered public accounting firm that currently complies with PCAOB inspection requests (i.e. outside of mainland China / Hong Kong), which is not an easy feat - especially for Alibaba which has a sprawling business that is primarily China-based. What is the August 26, 2022 Statement of Protocol and What Does it Mean for Alibaba?

Shareholder Returns

BABAUS Online RetailUS Market
7D1.5%-0.4%-2.5%
1Y-44.5%-37.1%-23.2%

Return vs Industry: BABA underperformed the US Online Retail industry which returned -37.1% over the past year.

Return vs Market: BABA underperformed the US Market which returned -21.5% over the past year.

Price Volatility

Is BABA's price volatile compared to industry and market?
BABA volatility
BABA Average Weekly Movement6.9%
Online Retail Industry Average Movement10.7%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: BABA is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 7% a week.

Volatility Over Time: BABA's weekly volatility (7%) 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$211.78b
Earnings (TTM)US$5.56b
Revenue (TTM)US$119.88b

38.1x

P/E Ratio

1.8x

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