The Alipay Crackdown Is No Surprise (Podcast)
Summary
- This week's podcast revisits three names we've covered on the Razor's Edge this year.
- Alibaba took a hit around reports of Alipay regulation. Akram's Razor makes the case that this was foreseeable, and that the clouds will clear soon enough.
- Stitch Fix has been trading like it's going to be adversely regulated, but it could just be the last thrashing out of market silliness.
- Twitter saw a negative Goldman Sachs report and frustration among bulls, but it may be that both sides are taking their eyes off the ball.
A podcast by Daniel Shvartsman and Akram's Razor
This week's The Razor's Edge revisits three stocks we've covered so far this year. On the surface, it doesn't seem like much connects Alibaba (NYSE:BABA), Stitch Fix (SFIX), and Twitter (TWTR) beyond their recent underperformance (and it's a bit harsh to say that of Twitter), and the fact that we've talked about them on this podcast. But, as we went through the three, I found a number of echoes. Each hold a potentially important disagreement over how to assess the given company/stock and their challenges, and each has an opportunity to correct that misperception in the coming months.
In Alibaba's case, the story is still the China regulatory environment. A Financial Times report of a crackdown on Alipay, an app owned by Ant Group, which Alibaba owns about 33% of, has been treated as the latest example of a power grab by the Communist Party. We talk about why at the least, this news shouldn't be a surprise for shareholders, and also what the broader regulatory context is and what that portends for Alibaba shareholders. It involves the second Olympic games in seven months, if you'd like a hint.
Stitch Fix has gone from one of the secondary January short squeeze stocks to one of the sharper drawdowns in 2021, down nearly 70% from peak and 40% year to date. There has been some fundamental news recently - a stylist exodus that may portend either a shaky model or a transitioning one under new CEO Elizabeth Spaulding - but also the stock seems to have hit a negative reflexive loop. They report earnings after the close today, which will be Spaulding's first report as CEO, so I talk about how the stock is stupid even though the company is doing well, and what I'm watching for on the call and going forward.
Twitter's story is the most concise, ala the tweet model. A new Goldman Sachs analyst initiated coverage as a bear on the stock and doesn't believe the company can hit their numbers. Bulls also seem frustrated by lack of progress in new endeavors like Super Followers and Twitter Blue. We talk about the luxury of having analysts not believe in management, and about which part of Twitter's business deserves more attention.
Click play above to listen, and feel free to jump around to the stock you're most interested in using the timestamps below.
Topics Covered
Alibaba
- 3:30 minute mark - Why the recent regulatory reports around Ant Financial aren’t shocking
- 10:00 – US corollaries for the current discussion
- 14:00 – Last year’s warning
- 18:00 – The significance of the FT report and how it might help Alipay’s/Alibaba’s position
- 22:30 – The impact on Alibaba’s valuation itself
- 26:30 – China regulators vs. U.S. regulators
- 33:00 – Time horizon for clouds to dissipate
Stitch Fix
- 38:00 – Why is Stitch Fix so bad? Reviewing the story, valuation, stock, etc.
- 49:30 – The stylists’ news
- 53:00 – The market context for SFIX’s stock
- 55:30 – The Goldman downgrade and the confusion about Twitter from bulls
- 1:02:00 – Reframing the creator tools
- 1:08:00 – Blurring lenses in analyzing Twitter (or all of these names)
- 1:12:30 – The luxury of not having the market’s trust
This article was written by
Disclosure: I/we have a beneficial long position in the shares of SFIX, TWTR, AAPL either through stock ownership, options, or other derivatives. 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.
Additional disclosure: Daniel Shvartsman is long SFIX, TWTR, and AAPL.
Akram's Razor is long BABA and TWTR and short YALA.
Nothing on this podcast should be taken as investment advice.