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Alibaba: Solid Growth Prospects In Each Division, Uni Marketing Adds Optionality

Kenra Investors profile picture
Kenra Investors


  • Alibaba has a diversified business where each division is exposed to strong secular growth trends.
  • I expect all these divisions to continue to deliver high growth rates, although some of them are exposed to significant competitive pressures.
  • Uni Marketing is a recently announced launched service that offers Alibaba an interesting source of additional growth.

Alibaba (NYSE:BABA) is one of China’s three Internet giants, together with Baidu (BIDU) and Tencent (OTCPK:TCEHY) (OTCPK:TCTZD). In this article, I am going to update my thoughts on each of the company’s divisions, and I will comment on the recently announced Uni Marketing service.

Core Commerce

Core Commerce is the main business segment (accounting for about 87% of sales) and continues to drive the company’s high growth rates. Besides the obvious organic growth in e-commerce that results from the increasing penetration of this “way of shopping” in China, Alibaba benefits from other collateral factors that contribute to push the segment well beyond the growth in e-commerce. We know that Alibaba’s recent revenue growth was simply outstanding for a company of its size. Last quarter, the company managed to beat revenue estimates by $400 million and delivered the strongest YoY growth since the IPO, with revenue growing 60% over the corresponding period of 2016. The strong performance in the division was a result of both international expansion and domestic growth, which was helped by a significant rise in mobile active users for Alibaba's core platforms. A large portion of the segment’s growth was a consequence of paid-click growth, which was driven by algorithm optimization, improvement in product relevancy and content page personalization. I think this is resulting in a higher amount of spending-per-user on the e-commerce platforms, and also higher advertising revenue. According to eMarketer, Alibaba is now the number one internet company in China in terms of revenue generated by digital advertising. Seeing such a strong trend in the core commerce business, which has accelerated last quarter, it is obvious that Alibaba’s strategy is working well, and I think it’s strengthening its competitive position against other e-commerce players. After all, we know that the bigger it gets, the more buyers and sellers these e-commerce platforms will acquire

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Kenra Investors profile picture
Kenra investors is a 5-star financial expert according to Tipranks and is constantly in the top 5%-10% of world financial experts.Thanks to the experience gained in almost 10 years of activity and study in the stock market and 5 years in professional equity research, I have developed a very sound understanding of many aspects of business, finance and investing. My approach is based on combining fundamental, technicals and macro to deliver meaningful outperformance. I am always open to considering professional collaborations or formal employment opportunities in equity research and/or portfolio management globally. For any purpose, you can message me here on Seeking Alpha or send an email to kenrainv@gmail.com

Analyst’s Disclosure: I am/we are long BIDU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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