How One Government Decision Made Alibaba (BABA) Investors Rich Overnight

[View in browser]( [The Juice Logo] BROUGHT TO YOU BY: [Logo]( Editor’s Note It’s Friday. Time to give you a stock pick from our sister newsletter, The Spill, so you can think about it over the weekend and maybe make a move Monday morning. While The Juice helps you be better with money across the board, The Spill focuses on stocks financial pros are researching and judges how good of buys they are. If you’re already sold, [you can sign up for The Spill – for free – here](. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D633241?utm_medium=ic-nl&utm_source=122926 ) How One Government Decision Made Alibaba (BABA) Investors Rich Overnight No one wanted Chinese stocks…until now. China’s stock market soared after the country’s central bank cut interest rates by 50 basis points while injecting liquidity into the banking system. This comes a week after the Politburo announced measures to stem the decline in the country’s property values. According to our TrackStar data, financial pros scrambled to keep up with the exploding search volume for Chinese stocks in the past week. [Alibaba (BABA)]( came out on top. We’ve written about how burdensome regulations and restrictions hold back this great company. But does this latest stimulus change our opinion? [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D633241?utm_medium=ic-nl&utm_source=122926 ) Brought to you by [UpMarket]( [Unlock the Power of Hedge Funds with UpMarket]( [UpMarket - Unlock the Power of Hedge Funds with UpMarket]( Are you an accredited investor looking to diversify your portfolio? UpMarket opens the door to hedge fund investments, previously reserved for the ultra-wealthy. With their user-friendly platform, you can access professionally managed hedge funds and other alternative assets with ease. Join UpMarket today and start building a more diverse portfolio with alternatives. [Sign Up Now - It's Free!]( Disclaimer: All investments have the risk of loss. UpMarket is not associated with or endorsed by the above-listed companies. Only available to eligible accredited investors. View important disclosures at www.upmarket.co Continued... Alibaba’s Business Founded in 1999 by Jack Ma, Alibaba evolved from a simple online marketplace to a multifaceted tech giant. The company’s ecosystem encompasses e-commerce platforms, cloud computing services, digital media, and entertainment. Flagship platforms Taobao and Tmall serve over 1 billion active consumers annually, offering everything from daily necessities to luxury goods. Alibaba Cloud, meanwhile, has emerged as a leading provider of cloud infrastructure and AI technologies in Asia. Alibaba segments its business into the following areas: - Taobao and Tmall Group (47% of total revenues) - Core e-commerce platforms for China retail market - Cloud Intelligence Group (11% of total revenues) - Provides cloud computing and AI services - Alibaba International Digital Commerce Group (12% of total revenues) - Operates cross-border and local e-commerce businesses outside China - Cainiao Smart Logistics Network (11% of total revenues) - Offers logistics and supply chain management services - Local Services Group (7% of total revenues) - Includes food delivery and map services - Digital Media and Entertainment Group (2% of total revenues) - Encompasses streaming platforms and content production Alibaba's relationship with the Chinese government has been tumultuous in recent years. The company faced a significant setback in 2020 when regulators halted its affiliate's $34 billion IPO, Ant Group, following founder Jack Ma's criticism of financial regulators. This led to increased scrutiny, resulting in a record $2.8 billion antitrust fine in 2021. Despite these challenges, Alibaba has aligned more closely with government priorities, investing in rural e-commerce and advanced technologies. In its latest quarter ending June 30, 2024, Alibaba reported a 4% year-over-year increase in revenue to RMB243.2 billion ($33.5 billion). The company's core e-commerce business showed signs of stabilization, with Taobao and Tmall Group achieving high single-digit online GMV growth. Notably, Alibaba's cloud business returned to positive growth, driven by increasing adoption of AI-related products. The company continues to invest heavily in AI infrastructure, reflecting the growing demand for AI services among its cloud customers. Management expressed confidence that revenue from external cloud customers will return to double-digit growth in the second half of the fiscal year and gradually accelerate thereafter. Financials [Financials] Source: Stock Analysis Alibaba’s exceptional growth ran into severe headwinds in the post-pandemic era as China kept the country on lockdown, hampering business. Subsequently, revenue slowed from double-digits to single-digit growth. Fortunately, the company held its margins, generating ~$20 billion in free cash flow. Recently, the company has taken steps to return some of this money back to shareholders through a $2.5 billion dividend and stock buybacks of $18 billion, yielding 8.4% annually. Valuation [Valuation] Source: Seeking Alpha Despite the recent surge in share price, Alibaba, and really all Chinese online retail stocks are reasonably cheap. Alibaba is the most expensive, trading at 16.5x forward earnings and 10.4x cash, while [Vipshop (VIPS)]( is half that price, trading at 7.6x forward earnings and 4.0x operating cash flow. The rest of the companies land somewhere in between. Growth [Growth] Source: Seeking Alpha [Pinduoduo (PDD)](, owner of Temu, has seen the highest growth rates of any stock on this list. However, the rest have all seen sales slow to single-digit gains as the Chinese economy slowed. Interestingly, Alibaba is the only company on this list to have seen its cash flow decrease on average over the last three years. Profitability [Profit] Source: Seeking Alpha We were surprised to see that Alibaba’s margins are low relative to those of its competitors. [JD.Com (JD)]( is the only one with weaker numbers across nearly every measure. Yet, Pinduoduo and [Baidu (BIDU)]( do substantially better in every category, especially net income margin. [Access Hedge Funds and Pre-IPO Deals]( * Are you an accredited investor looking to diversify your portfolio? UpMarket opens the door to hedge fund investments, previously reserved for the ultra-wealthy. With their user-friendly platform, you can access professionally managed hedge funds and other alternative assets with ease. Join UpMarket today and start building a more diverse portfolio with alternatives. [Sign Up Now - It's Free!]( *[Ad] * All investments have the risk of loss. UpMarket is not associated with or endorsed by the above-listed companies. Only available to eligible accredited investors. View important disclosures at www.upmarket.co Our Opinion 7/10 The latest stimulus package does put Alibaba back on a growth trajectory for a couple of years, or at least signals that’s where the government wants it. We’re also pleased to see the company begin returning the $61.8 billion in cash that’s built up on its balance sheet to shareholders. Nonetheless, this company still faces a heavy regulatory hand that creates uncertainty no investor should take lightly. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D633241?utm_medium=ic-nl&utm_source=122926 ) Proprietary Data Insights Financial Pros’ Top Chinese Internet Retail Searches in the Last Month Rank Ticker Name Searches #1 [BABA]( Alibaba 29 #2 [PDD]( Pinduoduo 23 #3 [BIDU]( Baidu 11 #4 [VIPS]( Vipshop 10 #5 [JD]( Jd.com 10 #ad [Navigating Market Volatility: The Alt Advantage]( News & Insights Freshly Squeezed - [How To Find Dividend Stocks In An ETF And As A Stockpicker]( - [Unlock Daily Stock Gems - FinPro Secrets Spilled!]( - [3 Ways To Invest In And With Artificial Intelligence (AI)]( - [Check Out The Juice’s Favorite ETF Screen]( [News & Insights-facebook-share]( [News & Insights-twitter-share]( [News & Insights-linkedin-share]( [News & Insights-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D633241?utm_medium=ic-nl&utm_source=122926 ) [We want to hear from you. Let us know your thoughts by clicking here]( [Pixel] [InvestingChannel Logo](#) Follow us on: [Facebook Logo]( [LinkedIn Logo]( [Twitter Logo]( [Instagram Logo]( To ensure delivery of all emails, [allow us on your list](. Manage your subscriptions with our [preference center](. [Unsubscribe here.]( View our privacy policy [here](. Copyright ©2024 InvestingChannel. All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc., newsletter is for information purposes only and is based on opinion. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or eliminate losses. InvestingChannel, Inc., makes no representation or implication that using any of the methodologies or systems in this newsletter will generate returns or insure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](