Alibaba | Value Trap or Undervalued Gem?

This write up is certainly one that comes with its fair share of risks. 

Now, I am not naive to the hesitation investors have when it comes to investing in Chinese equities. 

Government Corruption? Sure. 

Future economic stability? Probably not. 

Was the disappearance of Jack Ma suspicious? Extremely. 

But where uncertainty lies are plays that are worth exploring and Alibaba is on my radar.

Just because an item is at a garage sale does not mean there isn’t value to be found. 

Share prices are trading at a 20% discount compared to their 2014 IPO and 76% below their 2020 peak. 

Macro economic outlook: Over the past three years, Chinese and Hong Kong stocks have lost nearly $6 billion in value. As the world's second largest economy, factors such as a decline in real estate prices, deflation, debt, and whack-ass policies have left foreign firms weary of investing in the country of ______

I don’t know what people expect. China has experienced double digit growth over the past decade. Is that supposed to last forever? 

Here is my thought process… 

They have a prominent presence in America. According to reports, U.S. brands sold roughly $66.2 billion worth of products, from pet foods to cosmetics, via Alibaba Group’s marketplaces to Chinese consumers in 2022. 

Not to mention, a $52.9 billion contribution to US GDP. 

International commerce revenue has grown by 60%. 

They have a vast network of brands and seven business segments including:

• China Commerce
• International Commerce
• Local Consumer Services
• Cainiao
• Cloud
• Digital Media and Entertainment
• Innovation Initiatives 

Since going public, the e-commerce giant has 10x their revenue from increasing operations and acquisitions. 

Notable Financials”

Cash: $80.1 billion 

Total Assets: $252 Billion 

Market Cap: $162 Billion 

2022 profit margin: 1.6% 

2023 profit margin: 14.5% 

Alibaba reported revenues of $30.81 billion in the last reported quarter, representing a year-over-year change of +5.8%. EPS of $2.14 for the same period compares with $1.82 a year ago.