Alibaba Stock Analysis


Alibaba stock analysis

Business Description:

  • Diversified tech company

Alibaba stock analysis

  • Main business is the marketplace and other online retail businesses, which they categorize as core commerce. Core commerce accounts for 86% of total revenues (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

  • Cloud computing accounts for 8% of revenues with 60% growth rate while Cainiao with 4% of revenues and growth of 51%


Catalysts:

  • Rapid growth of Chinese economy

  • Worldwide Growth



Risks:

  • Regulations and Antitrust probes on big tech in China

  • Fears of delisting of US shares

  • Pandemic in China


Financial Analysis:


Alibaba stock analysis

Valuations:

  • My personal Biases:

  • Bearish on China in the short-term (coming months)

  • Did not do well on previous investments in Chinese tech stocks

  • Very conservative with all the uncertainties surrounding China


  • Assumptions:

  • Revenue growth of 20% annually for the next 5 years (Over 40% in the last 5 years)

  • FCF margin of 15% (less than average for the last 5 years)

  • Discount rate of 15%

  • Terminal growth rate of 4%

  • Margin of safety of 20%


Alibaba stock analysis

  • Exit Multiples based on P/FCF Ratio

  • Sales 20% higher in bull case and 10% lower in bear case

  • Shares outstanding stays the same


Alibaba stock analysis

Conclusion

  • Undervalued even with a margin of safety


Alibaba stock analysis







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