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Thesis: Alibaba is no longer a compelling investment, even when setting aside political risk.
I last covered Alibaba Group Holding Limited (NYSE:BABA) (OTCPK:BABAF) in May, focusing on what I considered the “elephant in the room” for
Alibaba: Weak Financials Compound Political Risk
Summary
- Alibaba is no longer a compelling investment, in my opinion, even when setting aside political risk, due to structural revenue growth and profitability issues.
- Recent earnings show Alibaba is stagnating, with anemic growth in key segments like Chinese eCommerce and declining profitability, making it unattractive compared to its Chinese and US peers.
- PDD Holdings, a newer competitor, has rapidly gained market share with innovative business strategies. I think this presents a more compelling investment case in Chinese eCommerce.
- A successful turnaround by Alibaba’s management or a policy shift by the Chinese Communist Party could lead to a recovery in Alibaba’s stock, though this is increasingly unlikely, in my view.
Investor based in Geneva, Switzerland. Follow me on Twitter @GenevaInvestor for daily macro & investing nuggets. I write about macroeconomics, global trends, and what I believe are asymmetric investment opportunities in the market. I have a Master's degree in Business Management. I am currently bullish on PLTR, US equities, Bitcoin. Friend "Rex Investing" is also a contributor to Seeking Alpha. Check out our Podcast: ‘Stock Market Lube’, available on Spotify.All opinions and analysis on SA are exclusively my own.
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.
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