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Alibaba: Cloud Service Will Likely Drive Its Revenue Growth

Juxtaposed Ideas profile picture
Juxtaposed Ideas


  • With the volatile political climate in China and the recent drop in tech stocks, we expect Alibaba Group Holding Limited to see its valuations decline further.
  • Due to the intense competition in Chinese e-commerce and slowing market conditions, BABA reported its slowest growth rate in FQ3'22 since 2014.
  • Despite the deceleration in revenue growth, BABA will still record a CAGR of 15.09% over the next two years, with impressive net incomes of over $22B.
  • We expect its Alibaba Cloud service to be a potential revenue driver in the future, given the massive global market value of $947.3B by 2026.
  • The current dip could be a good entry point for aggressive investors with a high tolerance for volatility.

Lamp of Wishes On Sand In Desert - Genie Coming Out Of The Bottle

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Investment Thesis

Alibaba Group Holding Limited (NYSE:BABA) has lost more than 28.5% of its value in the past six months, mainly attributed to China's volatile political climate and the recent slide for tech

This article was written by

Juxtaposed Ideas profile picture
I am a full-time analyst interested in a wide range of stocks. With my unique insights and knowledge, I hope to provide other investors with a contrasting view of my portfolio, given my particular background.Prior to Seeking Alpha, I worked as a professionally trained architect in a private architecture practice, with a focus on public and healthcare projects. My qualifications include:- Qualified Person with the Board of Architects, Singapore.- Master's in Architecture from the National University of Singapore.- Bachelor in Arts from the National University of Singapore.If you have any questions, feel free to reach out to me via a direct message on Seeking Alpha or leave a comment on one of my articles.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (25)

EliasMouawad profile picture
"Over the past five years, BABA had recorded massive revenue growth at a CAGR of 52.58%."

I can't understand why the stock is falling below the 5 year low level...
05 Mar. 2022
Baba is inherently risky due to several contributing factors. It may be difficult or even impossible to accurately price, this mess of a stock.
bronx54 profile picture
How can anyone recommend a Chinese company today knowing what is going on with the government control. I am sure most of these companies were good investment at one time, but not today, unless you have excess $$$ that you don't care if you lose it or not.
Juxtaposed Ideas profile picture
@bronx54 This is why we recommend only for speculative investors with high-risk tolerance.
John_III_XVI profile picture
Some are asking for research material. Really? Amazes me the extent of ignorance demonstrated by commenters. Hint: SEARCH engines have just been invented to do YOUR OWN research. Any phrase will do: "government controls BABA cloud data" for example. Thousands of more examples available for you than few listed below.







John_III_XVI profile picture
Only one flaw (maybe more) in the China communist cloud growth. It is a Chinese communist cloud COMPLETELY controlled by (you guessed it) the Chinese communist government. By law, ALL Chinese companies must now keep ALL of their data/records on government controlled cloud servers.

No free world government or business will use these cloud services. None. And no dictatorial government will allow use of cloud services offered by another country. Way too much suspicion & animosity globally. BABA cloud is severely limited to China. And the government that owns/runs BABA.

A "Buy" for aggressive investors? That is one description for them. IMHO, if you are a user and/or investor in Chinese tech then go with God. You are going to need all the help & protection you can get.
Chinese tech has been in a Bear Market for some time-------the Bear Market ain't over YET------but BABA's next price on the down elevator is $88.00 according to Carl Futia whose calls on BABA have been spot on. The Russia invasion has thrown the world a big curve ball BUT any price between $77.00 and $88.00 is a BUY BUY BUY------doesn't the clown Cramer say that when he is Bullish on a stock????
Rob Pinkerton profile picture
" we expect Alibaba Group Holding Limited to see its valuations decline further"
I agree with the authors statement here. The downward spiral is accelerating and the yield curve is getting flatter and flatter.
But I don't understand why the author could then rate the stock a buy even if you are an aggressive investor.
For my money it's time to cut loses and get out while you still have the shirt on your back.
I can't see a recovery happening any time soon. I got out a few months ago. I had losses but they weren't that bad then.
Juxtaposed Ideas profile picture
@Rob Pinkerton We do not expect clarity from the Chinese government so soon. It is likely to be a long-term play for those with speculative positions.
Djreef1966 profile picture
The CCP needs to park the bus they’ve been running everyone over with, or there won’t be anything left to scrape off of the road.
Baba is looking for its record low, possibly around $78 which is a bargain level for strong BUY. Baba got millions of consumers !
Djreef1966 profile picture
@Michael C W KO $78 is bankruptcy pricing. If it gets there the People’s Party will have some serious explaining to do to 1.3 billion citizens and have a horrific economic mess to clean up.
scottiebumich profile picture
@Djreef1966 company is not dependent on stock price on a go forward basis. They don't issue stock to raise funds. They have no net debt and can run on cash flow. Bankruptcy is a non possible outcome. Too many 'investors' grade performance stock price and not company performance. who cares what the price is today? If you need that money in the next 3-5 years you shouldn't be in stocks. If you are complaining about this stock price falling you don't understand investing. This is the FIRST time in my life I started taking out margin debt to buy shares. Granted I'm only taking out ~$15,000 as I wouldn't want to take on too much that I couldn't pay off in a month or so if I wanted to, but why the hell not take out debt with an annual cost of only 1.5%?
AliCloud slowed very sharply in 2021, with a +20% increase in Q4 (versus +40% for AWS, 6x larger), while every other cloud infrastructure provider in the world actually accelerated in 2021...
Big market share losses over the last 2 years. Very disappointing
scottiebumich profile picture
@Xkdodifkdl Slowed due to lost large client (base effect), will start to increase on a base effect basis in the next quarter.
@scottiebumich the loss was in the march quarter 2021. In calendar Q4, Cloud Computing decreased -3% QoQ. Since Q1, growth was 16.5% during these 9 months... That's no basis effect
Juxtaposed Ideas profile picture
@scottiebumich You are right. BABA mentioned it during their earnings call as well, with improvement expected over time.
itstmb profile picture
04 Mar. 2022
By the time Chinese regulators calm down on big tech, it will already be well priced in. If you truly believe in value, this is a no brainer even if it keeps going down short term.
Greenhorn Investor profile picture
Thank you for the article
Juxtaposed Ideas profile picture
@Greenhorn Investor Thank you for the kind words!
Chinese military runs their cloud services.
I have a flyer on it.
Juxtaposed Ideas profile picture
@dinoperson Thank you for the information!
Charles Ian Tan profile picture
@dinoperson do share the source please!
@Charles Ian Tan Senior---------WELL SAID and the usual smart comment from you!
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