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Alibaba is a multi-national conglomerate, best known for its eCommerce businesses. Formed in 1999 in Hangzhou, China, it has grown to be the largest retailer and eCommerce platform in the world. It is also the world’s largest artificial intelligence and internet companies, one of the biggest venture capital firms, and one of the biggest investment corporations in the world.
Alibaba has a fiscal year that begins April 1st and ends on March 31st. For the 2018 fiscal year ending March 31st, 2019 Alibaba had revenues of roughly $54.4 billion, up from just over $35 billion in the previous year.
Alibaba runs several eCommerce platforms, which make up the bulk of its earnings. These include the B2B Alibaba.com site, the C2C Taobao site, the B2C Tmall site which is brand focused, and the flash shopping site Juhuasuan. It also runs the increasingly popular AliExpress site, which connects small business in China with consumers all across the globe.
In 2019 Alibaba acquired a controlling stake in Lazada, a competing online marketplace that operates primarily in Southeast Asia. It has also launched a number of grocery stores where customers can order in store or online to have their items delivered in 30 minutes or less. They can even request to have food items cooked to eat at the supermarket food court.
In addition to collecting storefront fees and commissions on sales the monetization model at Alibaba relies heavily of P2P and display marketing, as well as promoted selling.
Outside of eCommerce Alibaba also has a cloud-computing business called Alibaba Cloud, and an online payment platform called Alipay, which was later branded as Ant Financial Services.
Alibaba also holds stakes in online video company Youku Tudou and entertainment company Alibaba Pictures, as well as its own music division called AliMusic.
Despite being a Chinese company, Alibaba chose to list its shares in the US on the NYSE in 2014. At the time the initial public offering was the largest in history, raising $21.8 billion. The stock ended that first day of trading at $93.89 a share.
Shares didn’t perform as well in the months following the IPO falling from the $115 level in November 2014 to just under $60 by September 2015. The drop of nearly 50% was attributed to several factors, including increasing competition, some accusations of falsified goods being offered on the platforms, and missed revenue estimates.
The stock made some gains in 2016, but really started to shine at the start of 2017, rising from $88.98 at the start of the year to $183.65 by the end of the year. That gain of over 100% was due to increased spending on marketing, expansion across the company’s product lines, and revenue growth that was no less than inspiring.
Most recently Alibaba has had a second listing on the Hong Kong stock exchange in November 2019. That listing as at $176 a share and the stock closed up nearly 7% in its first day of trading. In the months following the Hong Kong listing, the stock increased further, continuing the upward trajectory seen with the US listing. Towards the end of 2019, the US shares surpassed $210 a share, reaching a 52-week high, for a gain in excess of 50% in 2019.
In 2020, it proved to be a complex, yet successful year for Alibaba. A brief drift lower to circa $180 in March 2020 paved the way for a rally that pushed the stock to an all-time high of circa $315 by October, a level that investors hoped would not become nostalgic. Despite the COVID-19 crisis that impacted global markets, Alibaba saw its revenue rise by 42 per cent in the first 3 quarters of 2020. This was a result of consumers preferring to shop online to avoid exposure to the coronavirus. In Q3 2020, Alibaba posted revenue of $33.8 billion and $15.8 billion of cash inflows from operating activities for the first nine months of the year. Regulatory pressures from the ruling CCP party, however, began to weigh down on the stock, triggering a sharp dip to circa $220 before the end of 2020. The stock remained largely resilient and continued to trade above $200 as of March 2021.
How to Trade Alibaba Stock
There are a few tactics traders might want to consider when looking at trading Alibaba stock:
- The Trade War Play
While many Chinese stocks have suffered over the past 17 months due to the trade war between the US and China, Alibaba has notably been able to avoid the downdraft. After falling initially on trade war fears, the stock powered back as investors realised it wasn’t likely to be greatly impacted. Now the phase one trade deal is on the table, but it seems to lack details, and what little has been learned has shown it to lack much more than a halt in raising tariffs further. Investors’ enthusiasm for the trade deal is already waning, and when Chinese shares begin to suffer once more from the trade war look for Alibaba to provide a safe haven.
- Earnings News
Alibaba has grown earnings by double digits in 2019, and has seen revenues increase by more than 30% for 15 consecutive quarters. That kind of growth simply can’t be ignored, and each recent quarterly earnings report has been followed by a solid rally. Given the strength and growth of the business that trend should continue into 2020.
- Profits from the Cloud
Alibaba is currently the third largest cloud computing provider in the world, just behind Amazon and Microsoft. And it got there without even trying. Now the e-commerce giant has its sights set on becoming the largest cloud computing provider, and given its already huge base we’re betting it will be successful. The cloud business is attractive for much the same reason Alibaba’s eCommerce business is attractive – no inventory costs, and huge margins. Cloud computing revenues were up nearly 64% in Q3 2019, yet it still contributes just 8% of the company’s revenues. With China’s cloud computing market expected to grow roughly 500% by 2023 you can bet Alibaba will be a major beneficiary of that growth.
- More growth on the Horizon
Alibaba is just beginning to grow internationally, and should have an easier time breaking into markets in the West compared with Western companies setting up shop in China. That’s almost certain to give investors many future opportunities to buy whenever the stock dips. Watch for any weakness in the stock as a buying opportunity
- Regulatory Tensions In the recent past, Alibaba has faced regulatory tensions at home and abroad. Its tensions with US regulators prompted a secondary listing on the Hong Kong securities exchange in November 2019. The US continues to demand compliance with tighter auditing requirements as well as stricter counterfeiting guidelines. Alibaba faces even tougher battles at home. China’s ruling party, CCP, extended infringement on Alibaba and other companies by requiring a certain percentage of CCP members to be included in their workforce. The tensions further escalated and halted the listing of Ant Group, Alibaba’s premier FinTech subsidiary. In addition to fines and antitrust investigations, regulatory risks prove to be very substantial for the Alibaba stock.
- Ethical Concerns Despite tensions with the government, Alibaba continues to raise ethical concerns among investors. Its cloud and facial recognition technologies have already been abused and have aided in alienating minority ethnic groups in China. In a country where human rights remain a concern, Alibaba’s operations are at the centre of it all. These concerns could limit the backing of ethically conscious investors.
- Why you wouldn’t want to miss Alibaba Stock
Alibaba has often been overlooked by investors, but as the world’s largest eCommerce company it enjoys great economies of scale. It has also been successful in leveraging its size to take commanding market share in many of the other businesses it enters, from cloud computing to finance to entertainment. Now that it is targeting international growth, and its Hong Kong listing makes the stock available to mainland Chinese investors, it seems the best might yet be coming for investors. *This stock is available for trading on our MT5 platform with 0.001 lots.
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Alibaba Stock FAQ
- Why should I trade Alibaba shares?
Alibaba is the largest ecommerce company in the world, and being located in China gives the company access to over 1 billion consumers. And best of all for trading the stock is that it does exhibit a good deal of volatility, giving traders good profit opportunities on a regular basis. This is particularly true around earnings, when the stock has been known to rise or fall by 10% or more. If you want to trade in the growing ecommerce space, or get some exposure to China, then trading Alibaba is an excellent idea.
- Is Alibaba the best ecommerce stock for trading?
Alibaba or Amazon, which is the best ecommerce stock for trading? Why not simply trade both? With the CFDs available at AvaTrade, and the accompanying leverage, it’s easy to trade both shares, even if you have limited capital. And if your trades are correct, you’ll soon see that capital growing, just like these ecommerce companies. Whether or not Alibaba is the best ecommerce stock for trading, it is still an excellent choice for traders, who can take advantage of the volatile nature of the stock to make regular trades, and hopefully profits as well.
- What’s the best strategy for trading Alibaba shares?
Alibaba can be analysed using fundamental analysis, but like many high growth companies the fundamentals don’t always mesh with the trading activity in the stock. That’s why technical analysis is quite popular when determining entry and exits points for Alibaba trades. Because of the price action in the stock oscillators such as the RSI and MACD can work very well in trading Alibaba. Looking for support and resistance levels in price channels can also be a successful strategy since the stock doesn’t trend as much as some of its peers.