Is It Time To Invest In This Stock Again?

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Alibaba is a stock that gave many investors heartache. Because it has been on a freefall since 2021 while SP500 gained 58%

However, it has shown some signs of turning around. In 2024, it has gained 16.4%, outpacing the SP500 11% gain.

In terms of technical analysis, it has meaningfully broken the 200 EMA line which is a strong resistance. Below I’ve broken down Alibaba's various business segments and their recent performance. There’s a notable disparity between segments, with some showing phenomenal growth while others remain relatively flat. Let’s dig deeper to understand these segments, where Alibaba is experiencing growth, and what strategies they're employing to reignite growth in underperforming areas.

Taobao and Tmall Group

• Strategic Investments: Increased focus on price-competitive products and customer service.

• Membership Program Enhancements: Improved benefits and technology aimed at enhancing user experience.

• Results: Improved consumer retention and higher purchase frequency.

• Growth Metrics: Double-digit growth in online gross merchandise value (GMV) and order volume year-over-year, driven by an increase in both the number of purchasers and purchase frequency.

Cloud Intelligence Group

• Core Offerings: Includes elastic compute, database, and AI products.

• Revenue Growth: Double-digit year-over-year growth.

• Price Reductions: Lowered prices across over 100 public cloud products to enhance cost efficiency and boost adoption.

• Long-Term Strategy: Making services more affordable to attract a broader customer base.

AI Revenue Growth

• Triple-Digit Growth: Accelerated AI-related revenue growth, recording over 100% year-over-year increases.

• Diverse Sectors: Growth from foundational model companies, internet companies, financial services, and automotive industries.

• AI Chip: Alibaba unveiled its first chip to power artificial intelligence (AI) processes called the Hanguang 800. Alibaba claimed that it can cut down computing tasks that would take an hour down to minutes.

International Digital Commerce Group

• Revenue Increase: 45% year-over-year growth.

• Key Driver: Cross-border business on AliExpress.

• Competitive Edge: Price competitiveness and timely delivery leading to increased customer adoption.

Cainiao Smart Logistics Network

• Revenue Growth: 30% year-over-year increase driven by cross-border fulfillment services.

• Strategic Focus: Extending premium delivery services to more countries, currently covering 14.

• IPO Plans: Paused plans for a Hong Kong IPO to focus on closer integration with AliExpress.

Price Targets from Other Websites

• MarketWatch: Analysts have a consensus price target of $140 for Alibaba, indicating a potential upside.

• Yahoo Finance: Price target ranges from $130 to $150, reflecting positive sentiment among analysts.

• TipRanks: Average price target of $145, based on evaluations from top analysts.

This detailed look at Alibaba’s business segments reveals why the company's overall revenue is growing at just 7%. While some segments, like AI, are thriving with triple-digit growth, others are lagging. It’s an interesting analysis to see which areas are driving performance and which need more attention.

Lastly, prominent investors have been buying into Alibaba shares, notably:

1. Howard Marks (yes the one and only)

2. Michael Burry (The Big Short guy)

3. Dan Loeb (Famous Third Point Fund)

Wishing you a profitable week ahead,

May Your Profits Grow!

Pete
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The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.