Thursday, 24 December 2020

Alibaba Share Price Drop – An Undervalue Gem?

Alibaba Share Price took a big tumble today of more than 8% when China authority started an investigation into alleged monopolistic practices at Alibaba and summoned affiliate Ant Group to a high-level meeting over financial regulation. 

Seeing this as an opportunity, I continue to accumulate Alibaba as I feel that the stock is greatly undervalued, despite being one of the most profitable companies in the world. 

Alibaba has FCF of USD24B over revenue of USD90B (27%), comparable to Apple as being a cash cow. In comparison, Amazon has a FCF of USD27B over revenue of USD322B (8.4%), that pales Alibaba. 

Despite the profitability, Alibaba’s PE (ttm) is a mere 25 (today’s HKSE price) that is way cheaper than Apple’s 40 and Amazon’s 93. 

Alibaba IPOed at USD68 more than six years ago, and price rise is less than 400% today. In comparison, Amazon share price has grown more than ten times in the last six years. 

Furthermore, Alibaba has most of income coming from its “core commerce” operations with only less than 10% coming from its cloud’s revenue. Last quarter 3Q2020, Alibaba reported cloud computing brought in revenue of USD2.24B, displaying a remarkable 60% yoy rise. That was faster than Amazon Web Service’s 29% yoy revenue rise and Microsoft Azure’s 48% growth in the Sep 2020 quarter.

Read : Alibaba cloud growth outpaces Amazon and Microsoft as Chinese tech giant pushes for profitability

So do you think Alibaba is undervalued? 


9 comments:

  1. Morning Brolf..

    though i think BABA will get worse first, before recovering. it seems the authorities are driving a concerted effort, having a go at them.

    open sesame to huatness!

    and, Merry Xmas too !

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    1. Hi Bro, morning and Merry Xmas,

      Not just BABA, most things in life always seem to get worst before recovering.

      The authorities is going after ANT, not BABA! Haha....

      Ma owns and have say in Ant, but who ultimately owns and have the controlling say behind BABA?

      Question: Will China authorities harm their own company in the long run?

      Delete
  2. Morning Bro,

    I do think it will get worse too. As I was communicating with another blogger. There are other soe that are also monopolistic in nature, and why so much media coverage for the calling up of Any official. Very obviously it is to 杀鸡儆猴

    But I would say it is a good opportunity to watch the volatility. I am keeping it in my radar

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    Replies
    1. Morning Bro, Agree with you.

      Shares movement is swing up and down too fast this year!

      Really cannot catch it at many times.

      Delete
  3. Why go for BaBa there are much better stock to vest at wall st? BaBa is good but it is slow, How about FVRR CRWD FSLY NET TWLO i am vested since April 20.

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    Replies
    1. Too many stocks around, but not all are the most profitable in the world. Nonetheless have to agree w u that it has been too slow for too long.

      But normally spike up and down can be sudden. In this case, it is down for now.

      Delete
  4. With a drop of more than 30% from its highs a few months back BABA has become quite attractive.

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    Replies
    1. Hi Andy,

      Happy new year to you and wish you the best of health and wealth in 2021.

      Regards, Rolf

      Delete