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Alibaba (BABA) Ups Ante in Grocery Market With New Investment

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Zacks Equity Research
·3 min read
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Alibaba Group Holding Limited BABA has been reportedly expanding presence in the grocery market.

Reportedly, the e-commerce giant and DST Global have invested $750 million in a China-based grocery app, Nice Tuan.

Founded in 2018, Nice Tuan focuses on community grocery buying. It operates in 1,598 cities across China and generates 15 million orders per day.

The company plans to use the raised capital to expand supply chain capabilities and increase offerings.

Alibaba Group Holding Limited Price and Consensus

Alibaba Group Holding Limited Price and Consensus
Alibaba Group Holding Limited Price and Consensus

Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote

Grocery Segment Expansion Continues

Over the past few years, the China-based internet giant has been focusing on the groceries segment in the country.

China, with a population of approximately of 1.41 billion, has encouraging demographics. The economy is also witnessing strong growth in e-commerce. Reportedly, China’s community grocery buying market is expected to reach almost 1.3 trillion yuan ($193 billion) by 2025.

This segment is driven by growth in online groceries, which got a boost amid the pandemic. Groceries are set to become China’s second-largest e-commerce sector by 2022, behind apparel and footwear.

Earlier, the company entered into a strategic alliance with Ruentex Group and Auchan Retail S.A. to buy a 36.2% stake in China’s leading hypermarket operator, Sun Art Retail Group, from Ruentex for $2.9 billion (HK$22.4 billion) in order to cement its position in the grocery market.

Therefore, Alibaba is gearing up to make the most of the ongoing grocery boom in China and further expand its visibility therein.

Stock Performance

Alibaba has returned 14.2% in the past year, underperforming the industry’s 42.7% rally and S&P 500’s rise of 53.5%.

Zacks Rank & Stocks to Consider

Currently, Alibaba carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Analog Devices, Inc. ADI, NXP Semiconductors N.V. NXPI and ON Semiconductor Corporation ON, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Analog Devices, NXP Semiconductors, and ON Semiconductor is currently projected at 12.3%, 10% and 41.5%, respectively.

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