Business Description:
Alibaba is a technology conglomerate but the main business is the marketplace and other online retail businesses, which they categorize as core commerce. Core commerce accounts for 86% of total revenues. Core Commerce grew by 33% in the TTM and owns 18% of retail market share in China. Since they are not a retailer but a marketplace, they can draw higher profit margins compared to other ecommerce companies. For example, the profit of Alibaba is 22.4% compared to 4.9% for Amazon.
The New Retail and Direct Sales segment which includes Tmall Supermarkets grew by 101% but accounted for only 18% of revenues.
Cloud computing accounts for 8% of revenues with 60% growth rate while Cainiao with 4% of revenues and growth of 51%.
Currently, only the core commerce business is bringing considerable profits but these other bets could well pay off in the future with the diversified business that they have.
In the last two years, Alibaba grew its Annual Active Customers by 31% annually, reaching 1 billion customers this year. GMV in RMB grew by 16% annually in the last two years.
It is important to note that Alibaba ADS traded on the NYSE are under a VIE structure incorporated in the Cayman Islands.
Catalyst:
China is going to be the largest economy in the world by 2028 according to latest estimates and Alibaba will own much of the market share there. Besides, Alibaba is gaining popularity in other countries. 80% of customers are in China but in the TTM Chinese market grew by only 10% compared to 50% for the foreign market.
Ant Group is an affiliate company to Alibaba which is the largest fintech company in China. The company was supposed to have its IPO this year but it was stopped by regulators. Since then, the relations between the Chinese authorities and Alibaba have been deteriorating. This is, however, providing us with a unique opportunity to buy the stock at a cheaper price as it is down 30% from ATH.
Read the full analysis here: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/28037784