Alibaba

[dreamybear]

Alibaba missed expectations but will the impending HK primary listing improve its fortune, e.g. better market valuation ?

Alibaba eyes windfall gains from HK move
https://global.chinadaily.com.cn/a/20240...24b55.html

Alibaba earnings miss expectations despite cloud acceleration
https://www.cnbc.com/2024/08/15/alibaba-...ation.html

[dreamybear]

Its 2023-Q3 is a long but good read to find out what the new CEO/Chairman are focusing on, below the transcript:
https://www.fool.com/earnings/call-trans...transcrip/

Their priorities of usage of cash are in below order:
1. Investing in their Core Businesses.
2. Buying back shares.
Since 1-Jul to 15-Nov, have repurchased approximately $3B, which accounted for 1.3% of total shares outstanding.
Chairman Joe: have $13B of dry powder left & will continue to execute that buyback.
3. Dividend.
First time ever dividend of $0.125 per share or $1 per ADS.
The aggregate amount of the dividend will be about $2.5B.

New management key focus:
1) Focus on growing core businesses (ie: eCommerce, Cloud, etc) >> Lazada likely fall under this bucket.
2) Monetize Non-core businesses (divest, spin-off etc) >> XPeng likely fall under this bucket.
3) Sharpen the focus of each Major Business, cases in point:
- Taobao to focus on putting customer first and expand to be Super App or to quote Trudy Dai (Taobao group CEO):
"As we said, there's no question that the Taobao app has everything you could want or need. The only question is, can you think of everything you need? Or going forward, even if you can't think of what you need, no matter, the Taobao app will help you do the thinking."
The above I personally feel Taobao improvement in their search & recommendation (eg: just search for japan street style and there you go, the clothes, pants and whatnot).
- Expand Ali Express Choice (AE Choice), to quote Jiang Fan (Int group CEO):
"Looking ahead, we see some high-confidence market opportunities, including further expansion of AE Choice and opportunities in some emerging markets. Over the next few quarters, our short-term business focus will be on rapidly expanding our business scale and market share."

To me, Bytedance & PDD are definitely eating away their shares, but with their valuation and urgency to CHANGE (recently Ma couldn't help but to "praise" PDD to rally his troops), I am willing to bet on this horse.

I think OPMIs have to factor in "sum-of-parts" i.e. views of mgmt + Beijing.

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https://www.straitstimes.com/business/wh...down-ended
"And Beijing has made clear it sees China’s technological future not in video games and online marketplaces, but in industries that are more pivotal to its geopolitical conflict with the United States, such as artificial intelligence (AI) and semiconductors."

[karlmarx]

I think that quote sounds about right.

It will be hard to argue that video games and online marketplaces are key to a country's future. But this does not mean that they will not be good investments.

Certainly, if you could identify 'China's Nvidia' and buy it cheap, you might see some pretty sweet results in 10 years. But this doesn't mean you have to. And on Nvidia creating such a strong competitive position in its industry, is just completely out of this world to me. From serving video gamers to being a core product to cutting technologies (blockchain, and then AI), as a layman, you would have thought such things are done by Intel. Tech is unpredictable.

As for online market places, it should be very clear by now, 2 years after the passing of covid, that they are here not only to stay, but will become even more influential in the lives of consumers. Online purchases as a percentage of total retailing continued to grow at a healthy rate; which is bad news for brick and mortar retailers (except for supermarkets and F&B. Alibaba wanted to dominate retailing so bad they entered the supermarket business, which didn't turn out so well). Assuming that China returns to a healthy level of inflation over the long-term, and online purchases (and hence, GMV) continue to grow, with the take-rate of online marketplaces remaining the same, revenues will continue to grow indefinitely.

Certainly, there is no ignoring that the Chinese e-commerce market has been extremely competitive in recent years and that has brought the old giant Alibaba to its knees. But competition behaves the same way as market cycles; there are times when it is hot and times when it is cool. This is particularly true in an oligopoly. Nobody is going to be gunning their throttle the whole time. Certainly Alibaba have lost much market share to PDD and BD, and regaining that will be challenging. But when the dust from the skirmishes of recent years settles -- Alibaba's shared in its latest results that CMR revenues are likely to increase in the coming quarter while PDD was more pessimistic -- everyone may take a break and enjoy a few years of juicing the merchants/consumers. Just a wild guess.

But the wildcard is its Cloud/AI business, which is still in its early days. We have yet to see 'knock your socks off' kind of practical AI applications go mainstream in China. When the day comes, there is a fairly good chance that Alibaba is one of its investors, or that the AI is built of Alibaba's LLM or served on Alicloud.

For all that, I think the valuation -- which seems to suggest that it is more like a mature stock -- is kind of undemanding.

[dreamybear]

Based on personal experience, buying clothes online is a bit challenging because despite the published sizes(some products' guides can be pretty vague), they may not fit as one imagined, or the colour may not be exactly what one expects ? Shoes can be another challenging category - can't really tell the weight / comfort level unless one tries it.

In the article, there are also issues like discounts based on minimum spending amts.

Given the relative short history of online shopping(vs established traditional retail), I guess the online merchants are still crossing the river by feeling the stones ?

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https://www.channelnewsasia.com/east-asi...ng-4754191
"Return rates are at their highest since entering the business, several e-commerce business owners selling women’s clothing told Chinese news outlet Yicai Global in a Nov 15 report.

Zhang Ke (pseudonym), a Taobao business owner told Yicai she understands the current return rate in the industry has reached 80 per cent, with some shops even seeing rates of up to 90 per cent."

[Wildreamz]

..

But the wildcard is its Cloud/AI business, which is still in its early days. We have yet to see 'knock your socks off' kind of practical AI applications go mainstream in China.

..

Interesting comment. Does LLMs count as practical mainstream AI applications? Or are you referring to Alibaba-owned LLM/AI applications specifically?

ByteDance’s ChatGPT-like bot now leading in China

ByteDance’s ChatGPT-like offering, has eclipsed Baidu’s Ernie Bot to become the most popular AI chatbot in China, according to a Bloomberg report that cited Sensor Tower data.

Launched in August 2023, Doubao has outpaced Ernie in terms of downloads and now has more regular monthly users on Apple’s iOS. Doubao has logged almost 9 million downloads – a million more than Ernie – in the year through April. Doubao also has over 4 million monthly users in China.

ByteDance says that its AI chatbot has 26 million active users on mobile and PC in China. In comparison, OpenAI’s ChatGPT mobile app has racked up 6.7 million monthly US users.

Beyond Duobao, ByteDance is also leaving its footprint in other generative AI applications. Gauth, an “AI homework helper” from ByteDance subsidiary GauthTech, became the second-most downloaded education app in the US in April, behind only Duolingo.

..

source: https://www.techinasia.com/bytedance-dom...s-platform

[dzwm87]

Nothing surprising. Return rate has always been high for Singles' Day. It's after all just bringing forward future purchases or consolidating deferred purchases. Nobody complained in the past because e-Commerce companies' share price goes up on massive GMV growth rate narrative. UBS assumes net GMV to be 60% of gross GMV so that already give a sense. The more compulsive it is, the higher the return rate. Livestreaming ecommerce is another example.

Based on personal experience, buying clothes online is a bit challenging because despite the published sizes(some products' guides can be pretty vague), they may not fit as one imagined, or the colour may not be exactly what one expects ? Shoes can be another challenging category - can't really tell the weight / comfort level unless one tries it.

In the article, there are also issues like discounts based on minimum spending amts.

Given the relative short history of online shopping(vs established traditional retail), I guess the online merchants are still crossing the river by feeling the stones ?