Alibaba's Current Price Discounts Ex-China E-Commerce Asset Value

Revenue segments as reported by the company.

Core Commerce

Cloud Computing

Digital Media & Entertainment

Other

Revenue Segments

Gross Profit, Operating Income, and Net Income as a percentage of Revenue

Gross Margin

Operating Margin

Profit Margin

Margins

An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX.

Product Development

Amortization of intangible assets

Impairment of goodwill

Operating Expenses

Year over year growth in Revenue and Operating Expenses.

Revenue Y/Y

OpEx Y/Y

Growth

Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders.

Outstanding Shares

Market Cap

Also known as Price/Sales Ratio. Calculated using Average market cap for the quarter / Annualized quarterly revenue.

Revenue Multiple

Alibaba is a Big Data-centric conglomerate, with transaction data from its marketplaces and logistics businesses allowing it to move into omnichannel retail, cloud computing, media and entertainment, and online-to-offline services. We think a strong network effect allows leading e-commerce players to extend into other growth avenues, and nowhere is that more evident than with Alibaba.

Alibaba’s internet services had annual active consumers of over 1 billion as of March 2022, versus the 1.2 billion online population in June 2022 per QuestMobile and the 1.4 billion population in China. This provides Alibaba with an unparalleled source of data that it can use to help merchants and consumer brands develop personalized mobile marketing and content strategies to expand their target audiences, increase click-through rates and physical store transactions, and bolster return on investment. Alibaba's marketplace monetization rates have reduced recently, due to increased compliance of antitrust laws, more competition, and weak consumer sentiment. Gross merchandise volume per annual active user was CNY 8,833 for the year ended March 2022 for Alibaba, higher than CNY 3,285 in 2021 for Pinduoduo and CNY 5,905 in 2021 for JD.com.

While we view the Taobao/Tmall marketplaces as Alibaba's core cash flow drivers, we also believe AliCloud and globalization offer long-term potential. While AliCloud will remain in investment mode in the medium term, accelerating revenue per user suggests a migration to value-added content delivery and database services that can drive segment margins higher over time. On globalization, third-party merchants are successfully reaching Lazada's users across Southeast Asia, something that should continue as the company rolls out incremental personalized mobile marketing and content opportunities. While early, we share management’s views about Ele.me offering incremental monetization opportunities from Alibaba’s user base.

Business Strategy & Outlook

Despite increasing competition, we're maintaining our wide economic moat rating based on Alibaba’s strong network effect, where the value of the platform to consumers increases with a greater number of sellers and vice versa. Alibaba is monetizing its network effect better than any other e-commerce platform in China. None of its new competitors, mainly third-party e-commerce platforms Pinduoduo and short video platforms Douyin and Kuaishou, have proved they can monetize the physical goods e-commerce market with a durable profit margin, but Alibaba has been profitable for a decade and we believe it will remain profitable for the next 20 years. In addition, we think that the livestreaming e-commerce that Kuaishou and Douyin offer is a supplement to e-commerce offerings, not a replacement of the mainstream e-commerce platforms. Livestreaming e-commerce tends to satisfy impulsive purchase instead of planned or urgent purchases. The return and refund ratio of livestreaming is high, which we think is inherent in its impulse purchase nature; this makes it difficult for brands to rely on this channel solely in the long term.

Even if these new competitors are successful in generating long-term durable profit, we still see Alibaba’s position in the e-commerce market as being irreplaceable due to its consumer mind share, vastest range of stock-keeping units, logistics infrastructure, operational expertise (governance of products and merchants, protection of consumers), and tools for merchants to manage full product lifecycles. It is the largest e-commerce platform that provides to its merchants predictability in sales and production volume, which leads to predictable production costs. Alibaba has reported over 90% retention for its core annual active consumers who are 25-44 years old and contributed 70% of gross merchandise volume for the year ended September 2021, despite the competition. Core annual active users on Alibaba's China retail marketplaces had a retention rate of over 90% for the year ended September 2021. In the year ended June 30, 2022, there were over 123 million annual active consumers, each of which spent over CNY 10,000 on Taobao and Tmall. This represents a retention rate of approximately 98% versus the prior 12-month period, similar with the data as of March 2022. Alibaba is the pioneer in new retail and has solutions for diversifying consumption scenarios like on-demand delivery, online-to-offline, offline, and content e-commerce. We think Alibaba will always have its place in China’s increasingly complex retail market. 

Alibaba continues to most effectively monetize the network in terms of GMV and profit per buyer and margin. This should last for the next 20 years. Gross merchandise volume per annual active user was CNY 8,833 for the year ended March 2022 for Alibaba, higher than CNY 3,285 in 2021 for Pinduoduo and CNY 5,905 in 2021 for JD.com. In terms of estimated non-GAAP EBITA per annual active user, Alibaba’s China commerce businesses (includes China retail marketplace-based businesses, Taocaicai, Tmall Supermarket, Tmall Global, Freshippo, Alibaba Health, Sun Art, and wholesale business) rank the highest at CNY 36 for the quarter-end March 2022, versus JD Retail’s CNY 12 and PDD’s CNY 4. Starting from the June quarter of 2022, we no longer have annual active user numbers for PDD and Alibaba to update this metric. 

Alibaba’s China commerce estimated adjusted EBIT margin was 32%, higher than JD Retail’s 3.1% non-GAAP EBIT margin and PDD’s 12.4% non-GAAP EBIT margin (Pinduoduo has been profitable only since the June quarter of 2021). With regard to Alibaba’s retail and wholesale marketplace businesses, the main source of its network effect, the adjusted EBITA margin was 77.9% for the year ended March 2019 and 78.2% and 74.9% in the two subsequent years. Alibaba didn't report this number for the year ended March 2022 but we think it should be at the 70% level. Even though we think there will be a decline in the adjusted EBITA margin in the marketplace businesses in the next five years due to investment in engagement, live streaming, and so on, we don’t think this will be enough to reduce Alibaba’s return on invested capital to below that of Pinduoduo and JD Retail.

We do think that JD.com will increase its margin in the long run partly due to increasing bargaining power in its first-party platform and increased mix of the higher-margin third-party platform. But we believe Alibaba’s first-party supermarket business that has similar estimated revenue size with JD.com should also grow and see higher bargaining power over time. Like Pinduoduo, it is known for subsidizing its customers heavily to acquire customers. PDD has turned profitable at the non-GAAP operating level in the quarters ended June 2021. Its strategy has shifted to more focus on research and development from a previous focus on sales and marketing in the first five years of the company’s history. Agricultural products are a differentiator at PDD, which is one of the largest online agricultural product platforms. It is increasing its investment in technological solutions in agriculture, bringing more agriculture products online, upskilling farmers on e-commerce, and improving efficiency in the agriculture supply chain. The agriculture base in China is very disperse, not industrialized. Agricultural products—for example, green leaf vegetables—are nonstandardized, and the perishable nature and low ticket size make fulfillment costs as a percentage of sales higher than for higher-ticket-size and less bulky items, for instance, beauty products that have higher e-commerce penetration.It has started its overseas e-commerce platform Temu to take on Shein. Management also reiterated the importance to invest and profitability is not the priority. These lead us to think that Pinduoduo’s adjusted EBIT margin is likely to remain at a teens percentage on a full-year basis in the medium term. ByteDance is fighting many internet companies on many new fronts: gaming, cloud, business services, search, and e-commerce. As per The Wall Street Journal, ByteDance registered an operating loss of USD 2.1 billion in 2020 and USD 684 million in 2019; there is no report on its 2021 profit level. It is unclear if ByteDance’s China e-commerce segment will be able to register profit consistently.

Short-form video platforms Douyin and Kuaishou have entered the e-commerce arena with quick GMV growth, but we don’t think they will overtake Alibaba and JD.com in the next 20 years. These newer platforms monetize their network of users by content e-commerce (content such as short videos or livestreaming) or interest e-commerce (selling products by understanding and predicting users’ interests). Douyin targeted to achieve GMV of CNY 1,000 billion, and we estimate it achieved just below CNY 900 billion in 2021. Douyin’s GMV was up 220% in the year ended May 2022. Kuaishou achieved CNY 680 billion GMV in 2021, up 78% year-over-year. However, a reported 98.8% and an estimated 72% of GMV of Kuaishou and Douyin respectively are transacted within their own platforms, up from 16% and 30%, respectively in 2020, with the rest transacted in third-party platforms like Alibaba and JD.com. Douyin is trying to create a closed loop e-commerce platform, and we predict it does not want to direct its traffic to external e-commerce companies eventually. Nevertheless, a successful e-commerce company cannot only rely on traffic to succeed; customer services, governance of e-commerce platforms to balance the interests of merchants and consumers (management of issues like false advertisement and promise, formulating return policies), supply chain, logistics, and merchant support are critical. According to Paidai, an e-commerce tutorial company, distribution of products and after-sales customer service are far from perfect on Douyin. Besides, Alibaba aims to be a retail giant online and offline in many shopping scenarios. Both Alibaba and JD.com have business operations in on-demand delivery (30 minutes to an hour), half-/same-/next-day delivery and next-day pickup (community marketplaces), online, and offline. These are capabilities that the short-form video companies do not have and will take a lot of capital and time to develop. 

In addition, we think the livestreaming e-commerce that Kuaishou and Douyin offer is a supplement to the e-commerce offerings, not a replacement of the mainstream e-commerce platforms. Livestreaming e-commerce GMV was CNY 2,200 billion in 2021 as per iResearch, about 15.5% of the China internet shopping market, and is expected to grow to CNY 4,900 billion by 2023. Key opinion leaders and livestreaming hosts in these short video platforms conduct livestreaming sessions to sell products online. Livestreaming e-commerce tends to satisfy impulsive purchases instead of planned or urgent purchases. The return and refund ratio of live streaming is high, which we think is inherent in its impulse purchase nature, which makes it difficult for brands to rely on this channel solely in the long term. As per Xiaohulu, a livestreaming e-commerce service provider, the livestreaming industry’s return rate can be as high as 30%-40%, much higher than the traditional online sales return ratio. The return rate of the leading livestreaming hosts is 10%-15%. We think such a ratio will take time to reduce for livestreaming e-commerce platforms, as it takes time to improve e-commerce operations (customer protection), but the impulse purchase nature of livestreaming should keep the return rate higher than traditional e-commerce. The uncertainty in sales volume makes it difficult for established brands to plan production volume, which is difficult to achieve economies of scale. Such merchants wouldn’t rely on content e-commerce companies as their sole e-commerce channel. Thanks to the support of venture capitalists in China, new brands can spend generously on advertising dollars on the short video platforms to get brand exposure and sell their products, but maintaining the GMV of these brands is questionable if they reduce their advertising spending on these platforms. 

We harbor some concerns about Douyin being able to successfully build a third-party e-commerce platform that can not only recommend products to users, which would reduce the budget to spend on other e-commerce platforms. If users also develop a habit of proactively searching for products on Douyin, it will be a bigger blow to Alibaba. However, we reckon such a conclusion is far-fetched at this point, given that building a successful e-commerce company requires operational excellence. For instance, longtime e-commerce rival JD.com started to develop its 3P platform in 2010 but has not been able to rival Alibaba in 3P businesses. The last time JD.com reported the number of merchants on its online marketplace, in the fourth quarter of 2019, it had over 270,000 merchants, which pales in comparison with Alibaba, which had millions of merchants. During Alibaba’s 2021 investor day, Jiang Fan, then the president of Taobao/Tmall, said merchants have the highest operating efficiency on its platforms as Alibaba provides marketing, supply chain, and digitalization solutions. Alibaba provides comprehensive merchant support infrastructure throughout the entire consumer and product lifetime value. It consists of its business advisor, strategy center, CRM and brand databank platforms and tools. For instance, during the product introduction phase, merchants can make use of Tmall’s new centers for product innovation, trend, and strategy to uncover insights and make predictions. There are also tools to support R&D, test of concept, and new product launches. We have checked the tools offered by Douyin and PDD and they are not nearly as comprehensive. It will take time for new competitors to build such comprehensive offerings for merchants, especially when related to Big Data. What’s more, ByteDance’s core competencies are not supply chain and logistics, unlike JD.com and Alibaba. ByteDance’s successful products are all related to feed-based algorithms. We think it is unreasonable to assume Douyin will be able to overtake Alibaba in its pull-based e-commerce business. 

Anticompetitive exclusivity arrangements between merchants and Alibaba are a key environmental, social, and governance risk. We think the end of exclusive merchants on Alibaba’s platform has some, but not significant impact on Alibaba’s wide moat due to reasons aforementioned in this section, and we have accounted for the share loss in GMV to other platforms in our wide moat.

Wide

Economic Moat

Alibaba

Taobao is a Chinese online shopping website, which is operated in Hangzhou, Zhejiang by Alibaba Group. It is one of the world's biggest e-commerce websites, as well as one of the world's top 10 most visited websites according to Alexa. As of February 2018, Taobao has over 580 million monthly active users. Founded by Alibaba Group on May 10, 2003, Taobao Marketplace facilitates consumer-to-consumer (C2C) retail by providing a platform for small businesses and individual entrepreneurs to open online stores that mainly cater to consumers in Chinese-speaking regions (Mainland China, Hong Kong, Macau and Taiwan) and also abroad.

Taobao

South China Morning Post is a century old Hong Kong-based, English-language newspaper. It was aquired in December 2015 for about $266 million as part of its plan to grow its media and entertainment business.

South China Morning Post

Lazada is an e-commerce company in six Southeast Asian countries: Vietnam, Indonesia, Malaysia, Singapore, the Philippines and Thailand and is based in Singapore. Lazada was aquired in April 2016 in a $1 billion deal with its founder, Rocket Internet, making it Alibaba’s largest acquisition to date.

Lazada

AutoNavi is a Chinese map and navigation company, in 2014. The company has been providing mapping data to Google for more than a decade, and it also has connections with Apple Inc.

AutoNavi

Ant Financial (Alipay) is a third-party mobile and online payment platform, established in Hangzhou, China in February 2004 by Alibaba Group and its founder Jack Ma. In 2015, Alipay moved its headquarters to Pudong, Shanghai, although its parent company Ant Financial remains Hangzhou-based.  Alipay overtook PayPal as the world's largest mobile payment platform in 2013. In the fourth quarter of 2016, Alipay had a 54% share of China's US$5.5 trillion mobile payment market, by far the largest in the world, although its share fell from 71% in 2015 as its rival Tencent's WeChat Pay was rapidly catching up.

Ant Financial

Alibaba Group Holding Ltd. engages in providing technology infrastructure and marketing reach. It operates through the following business segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others segments. The Core Commerce segment consists of platforms operating in retail and wholesale. The China Commerce segment includes China commerce retail and wholesale businesses. The International Commerce segment focuses on international commerce retail and wholesale businesses. The Local Consumer Services segment is involved in To-Home businesses, which include Ele.me, local services and delivery platform, and Taoxianda, and To-Destination segment businesses which include Amap, the provider of mobile digital map, navigation and real-time traffic information, and restaurant and local services guide platform. The Cainiao segment has Cainiao Network and offers domestic and international one-stop-shop logistics services and supply chain management solution. The Cloud segment includes Alibaba Cloud and DingTalk. The company was founded by Chung Tsai and Yun Ma on June 28, 1999 and is headquartered in Hangzhou, China.

Earnings data Q1 2024

Revenue

Cost of revenue

Gross profit

Operating expenses

SG&A

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

JD.com

Pinduoduo Inc - ADR

The ongoing tech dynamism and market upheaval unveil the imminent rise of three high-potential stocks set to redefine 2024. In this era of unprecedented innovation and transformative strategies, the corridors of the trio resonate with the pulse of technological evolution.

Double Up: 3 High-Potential Stocks Set to Skyrocket in 2024

Morgan Stanley issued a new report on Chinese e-commerce stocks last night. The banker downgraded Alibaba and cut its price target on JD.com, but raised its price target on PDD Holdings.

Why Alibaba, JD.com, and PDD Holdings Stocks All Dropped Today

PDD, the owner of Pinduoduo and Temu, surpasses Alibaba as the most valuable Chinese e-commerce company.

Alibaba Stock Is Falling. It Lost Its Crown to Temu and Analysts Are Turning Sour.

Alibaba BABA, +0.28% was downgraded to equal-weight from overweight at Morgan Stanley, with its price target cut to $90 from $110. The bank said a fundamental turnaround is happening more slowly than it had assumed for both Taobao and Tmall and the cloud business, though it said there's limited downside to current valuation levels.

Alibaba downgraded by Morgan Stanley, which says PDD is top China e-commerce play

U.S. securities regulators levied fines totaling more than $7 million against three China-based auditors for a variety of offenses including issuing a false audit report.

U.S. regulators levy largest ever fine against Chinese auditors for falsifying financial reports

Alibaba has reported 16% YoY growth in its Local Services Group which includes food delivery business. The annualized revenue base of this segment is $8.5 billion and the annualized EBITA loss stands at $1.4 billion. Alibaba has been able to show rapid reduction in losses for this business due to lower incentives and operational efficiency.

Alibaba's Food Delivery Business Growth Can Surprise Wall Street

Alibaba sub-subsidiary Alipay is selling its stake in India's Zomato. Alipay will get $400 million for its investment.

Why Alibaba Stock Dropped Again Today

He was responding to employees' discussions on how PDD Holdings may soon overtake Alibaba in terms of market capitalization.

Billionaire Jack Ma Says Alibaba Will Change As Chinese Rival PDD Catches Up

Alibaba stock has been suffering after it abandoned its cloud spinoff plans. Plaudits for the performance of Chinese e-commerce rival PDD are adding more pressure for change.

Alibaba Stock Drops. A Rival's Success Might Act as a Call for Action.

Alibaba shares BABA fell 3% in premarket trade, as the Financial Times reported that company founder Jack Ma wrote on an internal forum that the internet giant will have to change and reform. Ma's comment was in response to an employee commenting on the success of rival PDD Holdings PDD, whose results topped earnings expectations.

Alibaba shares slip after report on Jack Ma wanting change

Jack Ma resurfaced once again and made a surprising post on Alibaba's staff forum. Responding to an employee, the Alibaba cofounder wrote that his company needs fundamental change.

Jack Ma popped up randomly on Alibaba's staff forum only to deliver a rare criticism of his company's performance

Alibaba is having trouble getting the advanced semiconductor chips it needs for AI and quantum computing research. Earlier this month, Alibaba announced it will cancel a planned IPO of its AI business.

Why Alibaba Stock Keeps Going Down

There are deals, and there are deals, and in the world of internet stocks, Alibaba NYSE: BABA is the one stock sticking out like a sore thumb. At prices below $80.0 a share, the only thing you can hope for this stock is to skyrocket to meet its fair value, which will be revealed in just a bit.

Alibaba is down more than 10% since earnings, now what?

Chinese e-commerce giant PDD Holdings Inc. (NASDAQ: PDD), formerly known as Pinduoduo, reported earnings early Tuesday morning that blew the doors off consensus estimates and sent ‌its stock price soaring, up more than 18% in the premarket session.

What Is Pinduoduo (PDD) and Why Is It Beating Up Alibaba (BABA) and JD.com (JD)?

Scion Asset Management CIO Michael Burry gained acclaim after correctly predicting the housing market downfall during the Great Recession. The latest round of Form 13F filings reveals two surprising buys for Burry's fund.

Meet the 2 Unexpected Stocks "Big Short" Investor Michael Burry Is Buying

Fiverr

Lithium Americas Corp

Solid Power

Tesla

Taiwan Semiconductor Manufacturing

I asked Google Bard to give me the names of seven stocks it believes will double in 2024. I agree with many of the recommendations it gave.

AI Stock Predictions: 7 Names Google Bard Believes Will Double in 2024

Bank of America

Kinder Morgan

When it comes to picking growth stocks, there's no shortage of options out there. As an individual investor, it can be incredibly difficult to determine which names have that magical combination of a disruptive business model, strong leadership, and growth potential that can lead to market-crushing returns over the long-haul.

3 Growth Stocks Billionaire Money Managers Are Loading Up On

2023 has been a very challenging year for China's Alibaba (NYSE: BABA). The company launched ambitious restructuring programs as its shares were offering a lackluster performance on the stock market and spent the year mostly on a downward trajectory.

Alibaba reshuffles cloud team to focus on AI; Time to buy?

Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

Alibaba (BABA) Stock Price Prediction in 2030: Bull, Base & Bear Forecasts

Alibaba's cloud business reported disappointing numbers in its latest quarter. The China-based tech giant also canceled the spin-off of the cloud division.

Why Alibaba's Stock Price Sank Despite a Solid Quarter

Alibaba Group (NYSE:BABA) is shaking up its cloud computing division with a trio of personnel changes meant to reignite the department after the Chinese tech giant pulled back its spinout and public listing plans.  The company plans to emphasize public cloud, hybrid cloud and cloud infrastructure, three businesses central to the artificial intelligence sector, with new executives heading up each.

Alibaba taps three new cloud computing executives after nixing spinoff/IPO plans

Apple

American Express

Chevron

Coca-Cola

Berkshire Hathaway has sold its shares in One97 Communications (NSE: PAYTM), the parent company of Paytm, incurring around 40% loss on an investment made over five years ago.

Warren Buffett sells entire stake in this stock

The shakeup comes after a surprise move by Alibaba last week to cancel the highly-anticipated initial public offering of its cloud unit.

China's Alibaba shakes up cloud unit management after scrapping the division's IPO

Alibaba Cloud's growth came to a halt. Alibaba cancelled Alibaba Cloud's spin-off.

What's Going On With Alibaba Cloud?

2023 is on course to mark the third straight annual loss for Chinese equities but a Goldman Sachs strategist is convinced that next year will be a different one.

News for Alibaba Stock (BABA)