Alibaba Group Holding Limited (BABA)

It's interesting to me how many people conflate Alipay and $BABA. Alipay is actually a piece of Ant Financial. Alibaba owns a 33% stake in Ant Financial. Over the last year, Alibaba's core ecommerce business unrelated to Ant Financial has actually strengthened because regulation has improved its moat and has brought down Tencent's ability to wall off itself, $JD and $PDD.

Further, the cloud business is in its infancy, the AI and investment pieces inside Alibaba are often hidden, and rapid international expansion is going unnoticed.

The company has been fined and regulation has passed, balance sheet is super strong, and no detrimental ties to Evergrande $3333.HK $EGRNY $EGRNF.

There are major tailwinds: Ridiculously expensive US market, Wealth Management Connect opening HK's market to the mainland, a likely shift from real estate investment into other sectors, growing Chinese middle class and overall GDP.

Patient investors will be rewarded.

All the people bad mouthing $BABA are the same people that think they are so smart paying 40-100 times sales for companies with negative earnings …. Currently earnings seem not to matter in this market, however at one point they always do.

Look at $SE …. It’s worth $185 billion which is 46% of $BABA market cap …. $SE has trailing revenue of $4.4 billion and negative earnings

$BABA has trailing earnings of $23.5 billion … yes that’s correct earnings not revenue. $BABA has 5.34 times the earnings that $SE has revenues.

So all the clowns thinking they are smart buying $SE at an absurd valuations on any metric (even on a forward basis) and trashing $BABA. Just remember earnings and valuation do matter at some point. I’d hate to be playing musical chairs when all of a sudden they do matter.

$BABA is not a broken company, it is a victim of a broken sentiment. Over time sentiment changes and in the end when entering a long position valuation does matter.

So you can buy $SE at 42 times sales with negative earnings and sky high expectations. Or buy $BABA at 3.5 times sales, a PE of 18 and extreme low expectations.

I know which one I am more comfortable owning, do you?

Guys. I just don’t get it..
I accept fact ab strong company, p/e, thousands work places for Chinese etc.
BUT. What gave you thought of bullish trend? I really don’t get it.

Are all bad news had been published yet? CCP ended their chase?

Need arguments. Pls help me.

P/s - there will be bright future for $BABA , but all depends on CCP; “when” is the main question. 150.7 right now..

IMHO

While it is true that some investors raised questions and concerns over China's recent regulatory actions, it should be pointed out that the moves are aimed at improving market conditions and cracking down on illegal business practices so as to create a fairer market for all. In fact, similar regulatory changes have also taken place in some Western countries, where internet giants like Facebook are facing increasing scrutiny, as governments around the world move to regulate monopolistic internet giants, as they attempt to level the playing field for smaller firms.

Investors at home and abroad are bound to benefit from a fair, well-regulated and sustainable Chinese market. Against the backdrop of China's accelerated financial opening-up, badmouthing the Chinese economy will only make those who are unable to separate fact from fiction when it comes to China appear stubborn and shortsighted.

In the past, Soros had profited greatly by playing up panic over imminent financial disaster in a number of countries. Fortunately, the markets' response or lack of response to his latest slander against China's regulatory actions suggested that his time may have finally passed

$BABA $BIDU $TME $JD $PDD $BILI $NIO $XPENG $LI $JINKO $NTES $TCEHY $YATSEN

Thread/ $BABA & the value Alibaba Cloud

Alibaba cloud is arguably the most bullish aspect of the $BABA thesis even though it’s <10% of FY21 total revenues and not yet profitable. Currently they have ~40% of cloud market share in China.
1/ The cloud market in China is only in early stages of development. They are approximately 5-6 years behind the US if they can replicate the same growth trends that a company like $AMZN has been able to achieve with AWS.
2/ the US and Chinese cloud market is very different and not a perfect comparison. But $AMZN & $BABA are the dominant players in each market so I will make some comparisons throughout the thread.
3/ Between 2010-2020 the cloud market had a ~30% CAGR. The global cloud computing market is expected to grow at a 17.5% CAGR until 2025. Being in early stages, the Chinese market theoretically should grow faster than the global market average.
4/ During the most recent earnings report from $BABA, cloud revenue grew 29% YoY. This was much lower than it could have been due to Covid-19 impacts and the Bytedance (Tik-Tok) contract. That 29% growth in a slow year is a good sign.


5/ In the second quarter of 2020, Alibaba cloud had an unprofitable -9% adjusted EBITDA margin. In the second quarter of 2021 it had a profitable 2% adjusted EBITDA margin.
6/ In comparison, For the three months ended June 2021, AWS contributed $14.8 billion in revenue and $4.2 billion in EBIT to Amazon (28% EBIT margin). Revenue growth of 37% & EBIT growth of 24%.
7/ over the past 5 years AWS has grown revenues at ~35% annually. IF Alibaba Cloud can grow revenues at even half that rate going forward it could become a meaningful part of $BABA total revenues.
8/ If we take a conservative growth rate of 20-25% over the next 5yrs than Alibaba Cloud FY26 revenue would reach between $22-27B (USD). Which is about 20% of LTM total revenues for $BABA.
9/ it would not be unlikely to see growth of 30% which would contribute ~$33B revenue towards $BABA. If they can achieve a conservative 20% EBIT margin (AWS ~28% EBIT margin), Alibaba Cloud could be worth approx $200B on its own in FY26 (30x EBIT multiple).
10/ I think it’s fair to say Alibaba cloud in FY26 will be worth between $100-200B USD which is approx. ~20-40% of the current $BABA market cap. If they match AWS growth and margins (unlikely, not impossible) it could be worth >$300B.
11/ ‘IF’ you believe the intrinsic value of the $BABA E-commerce business is worth more than the current market cap than you potentially could have a $200B cloud business for free + 1/3 of Ant Financial.

China to push on with opening capital markets to foreign investors.

This might be good news after the rout in China tech since Feb 2021. There was a lot of uncertainty whether China is shutting itself off from foreign capital and how it could lead to delisting of ADRs like $BABA, $BIDU, $JD, $PDD, $NIO, etc. But I guess they won't be turning their heads away from foreign investors anytime soon.

https://www.reuters.com/world/china/china-will-improve-opening-up-capital-market-securities-regulator-2021-09-06/

Long term investment on Chinese stock. Hmmm!!!
What happened to long term holders of $BABA. Lost years of gain in days.

Nio new ticker CCP.

Here are some interesting facts we've found about the Chinese regulatory environment related to big tech from Angela Zhang, who is a Chinese Law professor at the University of Hong Kong.
$BABA $TCEHY $PDD $DIDI $JD

1/Regulations were following a global trend to regulate Big Tech

2/Policy swings between lax and harsh enforcement is not unique to Big Tech or this administration

3/There are pros and cons vs. the governing style of the West. They can act faster, but the structure sometimes creates situations where quick action is necessary.

4/The government derives its authority from 1. Economic growth 2. Nationalism 3. Social stability

5/Chinese firms are very active to avoid damage and to shape policy which, like in the US, can actually entrench them further.

6/China sees the platform economy as its ticket to re-balancing their economy and to future economic growth.

7/They can't wait to regulate as there are too many dire consequences that would affect long-term economic growth, social stability, and therefore the legitimacy of the government.

8/Business leaders in China are often rewarded for taking action before getting approval from the government. In China, regulation tends to come after innovation, which is different from the US or Europe.

9/The recent regulation was destabilizing to the economy and it's possible that the government didn't foresee the impact it would have on the markets. If regulation is not executed correctly, it will affect the their key priorities (mentioned in #4).

On the algorithm rules, Alibaba $BABA Taobao already allows you to see which ad-related tags the platform gives you and remove them for 6 months at a time. The tags are personalized and quite extensive.

I really doubt people adjust it that much? How many of you adjust your Facebook ad options?

Finally, you can turn off all personalized recommendations in Taobao (or other Chinese e-commerce apps). That was required by law since 2019 as I mentioned earlier.

Hope to add more in the 150s. Great companies like $BABA need exogenous shocks to bring it to long term compounding entry price. If you think CCP is going full blown communist, then you're wrong. Otherwise what's the point do the Beijing Stock Exchange that focuses on ESG? They just want these foreign controlled tech giants to give back in the form of ESG investments to do what it failed to do, to stimulate creation of SME entrepreneurs who will be wealthy enough to drive the economy but not enough to be untethered from the China after making their billions. Just need to take the blow until the noise goes away