Fundamental Analysis Alibaba BABA
Alibaba Group Holding Limited is a holding company which owns subsidiaries operating in online and mobile commerce mainly in the People’s Republic of China.
Alibaba, not only China’s biggest e-commerce company also the largest e-commerce firm in the world in terms of gross merchandise volume, holding more than 80% share of the China’s e-commerce market.
The main goal of Alibaba’s growth strategy is to benefit from the transition of the traditional ” brick and mortar stores” driven by the integration of online and offline shopping, logistics and data transmission across a single value chain:
“In the coming years, we anticipate the birth of a reimagined retail industry driven by the integration of online, offline, logistics and data across a single value chain. With e-commerce itself rapidly becoming a “traditional business,” pure e-commerce players will soon face tremendous challenges. This is why we are adapting, and it’s why we strive to play a major role in the advancement of this new economic environment.” Chairman Jack Ma
The Company has already established an own ecosystem to integrate offline merchandise businesses to e-commerce:
Taobao: online shopping website similar to eBay and Amazon with mobile 507 million Monthly Average Users (MAUs) in March 2017.
Tmall: a spun off from Taobao as a platform for owners of both Chinese and international branded products to sell goods to consumers in mainland China.
Commerce technologies and services: Artificial intelligence to evaluate the massive volume of consumers data and to help merchants to efficiently handle consumer inquiries such as returns and refunds.
Alibaba Cloud: China’s largest provider of public cloud services covering industry segments across consumer brands, energy, financial institutions, healthcare, manufacturing, media, and retail.
Digital Media and Entertainment: The company sees tremendous growth potential in integrating its digital media and entertainment business with Alibaba’s core commerce.
The Company will reach international markets with its platforms AliExpress and Lazada.
The strongest economic moat of Alibaba is the network effect of its products. The company was a pioneer of e-commerce in the fast growing chines market and with a support of Chinese government, Alibaba could establish its own ecosystem with the large user base and strong network effect which is not economical to imitate by competitors.
Alibaba is heavily dependent on chines consumer market which’s growth can slow down.
A significant portion of Alibaba’s debt is denominated in U.S. dollars which make the company vulnerable towards currency fluctuation or falling RMB.
If you are investing in Alibaba yo are actually purchase Alibaba Group Holding Limited which is registered in Cayman island and has a contract with Alibaba Group in China to receive a share of the profits.
Alibaba has a wide economic moat and a huge potential to grow in the far east even if the growth of Chinese market slows down. We are considering Alibaba group as a long term investment but because of geopolitical risks, the position would not more than 2R.
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