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.