In the past month, Alibaba (NYSE: BABA ) stock has lost almost 20% of its value as a direct result of the U.S. trade war.
BABA Stock: Alibaba Stock Is The Cloud Emperor Source: Shutterstock
That’s one reason why the company wants to list its stock in Hong Kong. Another is the fact that, since Alibaba’s U.S. IPO, the Hong Kong exchange has changed its rules to let in dual-class stocks like Alibaba.
Nothing could have kept the shares from dropping after it was learned Softbank (OTCMKTS: SFTBY ) had sold 73 million of its shares, dropping its holdings to 26% of the total.
At its June 7 opening bid of $152.95, Alibaba is trading just 18% above its Christmas low, achieved at the bottom of the U.S. tech wreck last year.
But notice, dear reader, how we haven’t yet talked about the company. Trading is fun, but can you still invest in Alibaba?
Blue Skies in the Cloud for Alibaba Stock
I’m seriously considering it. I sold out of Alibaba in February, when it was at $167, and I’m thinking of getting back in.
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From a pure business standpoint, there’s little but clear sky ahead for the Chinese e-commerce giant.
Credit for that should go to its cloud. All the Cloud Czars, both Chinese and American, have their strategies. Alibaba’s is to be “more than just a cloud,” pushing its own applications to customers, becoming their computer . While Microsoft (NASDAQ: MSFT ) offers partner applications, Amazon (NASDAQ: AMZN ) offers infrastructure and Alphabet’s (NASDAQ: GOOG , NASDAQ: GOOGL ) Google offers services, Alibaba’s aim is to become a single source, to handle the “digital transformation” of clients’ business, and to be trusted to bring them artificial intelligence .
Alibaba’s cloud continues to be in pure growth mode, while the footprints of American Cloud Czars look set. The company recently announced it will open new data centers in Dubai, Japan, Australia and Germany, giving it eight facilities outside China against 6 inside it.
The Alibaba approach to cloud would make the U.S. Justice Department blanch. China is fine with single-company dominance, so long as a Chinese company is doing the dominating. Alibaba Cloud now has a “run-rate” of $4.4 billion per year , representing 7% of total revenue. (Amazon’s AWS cloud represents 14% of its revenue, according to its first quarter report.)
Jack Ma, now executive chairman, remains the public face of Alibaba. Enigmatic, Ma’s latest turn is as a Chinese Horatio Alger. He tells his fellow Chinese that by focusing on what customers want, and on the people serving those customers, they can succeed as he has.
Alibaba has become the dominant e-commerce player in China and is becoming the dominant brick-and-mortar player as well . This insulates it from trade tension, to a degree, because it can focus exports on fast-growing Southeast Asian markets. It can also ride the transformation of Chinese society, which has gone from the 18 th century to the 21 stin just 30 years .
Thus, many analysts have once again begun pounding the table for the shares. Based on its 2019 fiscal year report , released May 15, investors can today get Alibaba shares for just 7 times last year’s revenue and 47 times earnings. Given its 54% year over year growth rate, that’s not unreasonable.
The Bottom Line on BABA Stock
Alibaba continues to grow without any of the pushback of its American rivals.
No politician wants to break up Alibaba, to separate its entertainment or retail business from its cloud, or to hamper its growth in any way. China’s government has full visibility into what Alibaba and its users do. Jack Ma is a member of the Party in good standing.
To me that makes Alibaba more than a Cloud Czar. It’s the Cloud Emperor.