|Bid||269.76 x 900|
|Ask||269.89 x 1100|
|Day's Range||268.03 - 274.14|
|52 Week Range||188.05 - 289.69|
|Beta (3Y Monthly)||0.51|
|PE Ratio (TTM)||40.40|
|Earnings Date||Nov 12, 2019 - Nov 18, 2019|
|Forward Dividend & Yield||4.16 (1.53%)|
|1y Target Est||300.47|
Alibaba (NYSE:BABA) began a new era this month. Founder Jack Ma stepped down as chairman, a role that now belongs to current CEO Daniel Zhang. Although leadership transitions always bring some degree of uncertainty, it so far does not look like a factor that will hurt Alibaba stock.Source: zhu difeng / Shutterstock.com However, several external issues have held down BABA stock. Unfortunately for traders, these factors will probably continue to hamper Alibaba Group for the foreseeable future. Still, as long as Mr. Zhang preserves one thing, investors can earn substantial returns in Alibaba stock. Jack Ma's Departure Changes LittleJack Ma's has taken a gradual approach in stepping away from the company he founded. He vacated the CEO position in 2013 but remained chairman of the board until this month. Mr. Ma will retain a seat on the company's board. Still, the company now belongs to Daniel Zhang, a man who has held the CEO position since 2015.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 CBD Stocks to Buy That Are Still Worth Your Investment Dollars Many worry about the change in leadership. However, Alibaba made the transition a years-long process that has involved little in the way of surprise. Thus far, it looks like it will resemble that of Tim Cook taking over at Apple (NASDAQ:AAPL) as opposed to the transition that preceded Jeff Immelt's disastrous tenure at GE (NYSE:GE). Since Zhang has become a known quantity, I do not see Alibaba making radical changes. Likewise, I do not see any significant revisions in the case for or against Alibaba stock.To be sure, one thing has remained the same about Alibaba Group regardless of leadership. The best thing about Alibaba stock is its connection to China. Likewise, the worst thing about BABA stock is its connection to China. Profit Growth Boosts BABALike it or hate it, Alibaba stock is a growth machine. Analysts forecast earnings increases of 23.3% this year and 26% the next. They also predict revenue will grow by 31.9% and 29% in the same respective periods.Management can take much of the credit for these increases. Acquisitions such as the recent purchase of the NetEase (NASDAQ:NTES) e-commerce platform Koala merely enhance these increases long term. Also, with the continuing growth of China's middle class, BABA stock to maintain or increase its growth. More importantly, these increases come amid the current challenges facing Alibaba. Thus, the stock should deliver significant returns to investors even if external conditions do not improve. Do Not Expect a High MultipleHowever, investors also need to remember that Alibaba stock is a Chinese equity. Hence, it has seen its potential held back from the U.S.-China trade war. It also suffers from more internal political disputes. In all likelihood, the protests in Hong Kong led to Alibaba delaying its listing on the Stock Exchange of Hong Kong. Moreover, the company cannot directly sell stock in Alibaba to Americans. For this reason, BABA stock is an ownership stake in a Cayman Islands-based holding company entitled to the company's earnings.Do these factors hold Alibaba Group down? Absolutely. Many traders prefer to minimize politics. Also, while I do not expect Alibaba to renege on agreements that created the holding company supporting BABA stock, one cannot escape the fact that Alibaba stock is not an ownership stake in Alibaba.Hence, these factors have likely stopped Alibaba stock from achieving the triple-digit price-to-earnings (P/E) ratios seen with other growth tech stocks. Instead, the stock trades at a more modest forward P/E ratio of around 20.8. Given the doubts some investors hold about China, I do not expect this multiple to improve significantly. Fortunately for Alibaba stock bulls, it does not have to get better. The Bottom Line on Alibaba stockThe negatives will not stop the growth of Alibaba stock. While the trade war and conflict with China make for great headlines, traders have long since priced these doubts into BABA.Would an end to the trade war help? Since the beginning of the trade dispute hurt Alibaba stock, it stands to reason that BABA may recover some of that lost value. However, the status of Alibaba Group as a Chinese company, as well as the nature of Alibaba stock itself, will probably prevent it from achieving a significantly higher valuation. * 8 Dividend Stocks to Buy for a Recession Still, none of those issues matter as much as some believe. As long as the company can continue its massive growth, traders can still earn significant returns even if the multiple never expands.As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 8 Dividend Stocks to Buy for a Recession * 10 Companies Making Their CEOs Rich * The 7 Best S&P 500 Stocks of 2019 So Far The post Ma's Departure and the Trade War Will Not Stop Alibaba Stock appeared first on InvestorPlace.
It's tempting to believe that JD.com (NASDAQ:JD) is an attractive stock held down only by trade war worries. After all, JD stock, even with a strong 2019, sits about one-third below 2018 highs. And it looks reasonably cheap from a fundamental standpoint, with a 26 times forward multiple despite analyst expectations for 250% growth in earnings per share between 2018 and 2020.Source: Michael Vi / Shutterstock.com To be sure, I do believe JD stock is somewhat undervalued. I wrote last month after the company's blowout earnings report that the stock should keep rising. JD.com shares have moved higher, though resistance at $32 continues to hold.And JD stock clearly has taken some hits from trade war sentiment. Most notably, the stock fell 19% in eight sessions starting in late July, during which time the U.S. announced new tariffs on China. The distance from 2018 highs, too, might seem trade-related.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut the story isn't quite that simple. That doesn't mean JD.com stock is a sell. Again, I see upside from current levels. But it does mean that a trade war resolution, if and when it comes, might not be the catalyst some bulls hope. The Currency Effect on Chinese StocksThere no doubt is some trade war impact priced into Chinese equities at the moment. For instance, the iShares MSCI China ETF (NASDAQ:MCHI) still is down 23% from January 2018 highs. * 7 CBD Stocks to Buy That Are Still Worth Your Investment Dollars But one notable contributor to that decline has been currency. The Chinese yuan has fallen over 10% against the dollar over that span. That means profits -- and expected profits -- are less valuable in American dollars. And given that Chinese companies, including JD.com, generate nearly all of their revenues domestically, currency alone likely has driven roughly half the decline in Chinese stocks over the past 20 months. JD Stock UnderperformsMeanwhile, JD stock -- perhaps surprisingly -- actually has underperformed that ETF over the same period. JD shares have dropped almost 40%. And there have been some company-specific factors driving the decline. 2018 results were disappointing. JD missed Street estimates for revenue in both the second and third quarters. For the year, non-GAAP net income declined 31% in local currency.To be sure, JD was investing in its business, which created some pressure on margins. And the huge second quarter -- in which margins rebounded -- suggests those investments are paying off.Still, this year, revenue growth has slowed, to under 17% year-over-year in the first half. That's notably slower than larger rival Alibaba (NYSE:BABA). Pinduoduo (NASDAQ:PDD) grew its revenue 169% in the second quarter, albeit off a much smaller base.Again, none of this is to suggest that JD stock is a short or a sell here. At 26x forward earnings, valuation is reasonable in the context of current growth. But there are risks here. A number of key employees have left of late. Margins are exceedingly thin. Any incremental pricing pressure can lead to a repeat of 2018's earnings decline.And some of these issues have been a factor in the underperformance of JD.com stock. This isn't just a trade war problem. Is JD.com the Right Play?Would a trade war resolution help JD stock? Absolutely. But there's certainly a risk that it could be what is known as a "sell the news" event. It's not as if investors have simply dumped the sector: MCHI has gained almost 12% this year and JD.com stock has risen 43%. Some kind of resolution -- at some point -- already is priced in.There's another question as well: Is JD stock necessarily the biggest beneficiary of a trade war resolution? I still think there's an intriguing long-term case for iQiyi (NASDAQ:IQ) despite disappointing earnings. NetEase (NASDAQ:NTES) and Tencent (OTCMKTS:TCEHY) could be interesting as well.Forced to choose, I'd still pick JD. But that choice would be made understanding the risks. Margins are thin, competition is intense and China has economic issues that go beyond tariffs. Those factors will hold with or without a trade war -- and they suggest that JD isn't simply going to soar once a trade accord is reached.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 CBD Stocks to Buy That Are Still Worth Your Investment Dollars * 5 Stocks to Buy With Great Charts * 5 Goldman Sachs Stocks to Buy with Over 20% Upside Potential The post JD.com Stock's Problems Go Beyond the U.S.-China Trade War appeared first on InvestorPlace.
Alibaba (NYSE:BABA), like many Chinese stocks, has been volatile in 2019, mostly due to trade war concerns. Still, BABA stock has added more than 30% so far this year.Yuan, the Chinese currency has also depreciated considerably versus the U.S. dollar, and reports of a potential cooling of the Chinese economy well into 2020 have added to the recent uncertainty surrounding Alibaba shares.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAlibaba stock and other Chinese names may undergo further volatility and profit-taking in the coming weeks. However, investors with a two- to three-year horizon may consider investing in Alibaba shares, especially as the company gets closer to report earnings on Nov. 1. Here is a deeper look at the longer-term prospects of BABA stock. BABA Stock and eCommerce LeadershipAlibaba's current share of the Chinese eCommerce space is almost 60%, and about 87% of its total revenue comes from eCommerce.The group operates through three main eCommerce sites -- Taobao, a Chinese online shopping website, Tmall, a Chinese-language website for business-to-consumer online retail, and Alibaba.com, the group's international trade site. * 7 CBD Stocks to Buy That Are Still Worth Your Investment Dollars The three sites have hundreds of millions of users globally and host millions of businesses. BABA's mobile monthly active users (MAUs) on its eCommerce platforms now tops 755 million.Alibaba has recently announced the acquisition of Kaloa, the eCommerce platform of China-based NetEase (NASDAQ:NTES) for $2 billion. Kaloa currently provides Chinese consumers with imported merchandise, 'western' brands, as well as personal and household items, such as skin care, cosmetics and baby products.Tmall Global and Kaola are China's largest and second-largest cross-border eCommerce platforms, respectively. Therefore two combined platforms are likely to surpass rivals in China.Many analysts believe that Alibaba's bottom line is not going to be too adversely affected by current trade wars as its business model is tied to China directly, decreasing the long-term risks of bi-party trade wars.In fact, on Aug. 15, when Alibaba released quarterly earnings, the results exceeded analyst estimates in both revenue and earnings. BABA stock's revenue increased 42% annually to 114.9 billion RMB ($16.7 billion). It topped estimates by about $880 million.Strength in numbers was in part due to Alibaba's core commerce business where revenue rose 44% year-on-year in the June quarter.According to the quarterly report, annual active consumers on retail marketplaces reached 674 million, an increase of 20 million from the 12-month period ended March 31, 2019. Over 70% of those new consumers were from less-developed cities in China, a fact that was regarded as Alibaba's successful push into lower-tier Chinese cities. BABA Stock and the CloudAlibaba is rapidly expanding into many other lucrative industries, including cloud computing infrastructure, digital payments, online entertainment, and food delivery.With a population of 1.4 billion people, China is the largest country in the world. A rising middle class leads to higher consumerism, and that bodes well for many industries in China. One of those industries set to benefit is cloud computing.Alibaba's concentrated push deeper into cloud computing is increasingly being compared to the success of Amazon's (NASDAQ:AMZN) cloud business. In cloud computing, BABA is now the market leader in Asia.In the most recent earnings result, investors cheered that BABA's cloud computing revenue soared 66% YoY. It now brings in about 7% of total revenue.Alibaba has over 40% of the public cloud market in China. The market share of Tencent Holdings (OTCMKTS:TCEHY), its biggest competitor, is about 11%.As a result of increased diversification as well as the growth in the cloud space, Alibaba's total revenue is expected to grow by double-digit percentage rates. Such a growth rate would indeed be impressive for a company with a market cap of about $461 billion. BABA Stock and International ExpansionFinally, forward-looking investors may want to pay attention to BABA's international growth numbers too. Currently, more than 90% of the ecommerce giant sales are made in China.But BABA also has investments in start-ups in South Asia and Southeast Asia. Higher incomes and rising internet penetration rates are likely to strengthen both regions' eCommerce markets and contribute to sustainable growth for BABA stock.Among the start-ups in those regions in which BABA has stakes are Paytm, an Indian digital payments provider, and Lazada, a Singapore-based eCommerce company that is growing in overseas markets. For example, according to the most recent results, Lazada achieved over 100% YoY order growth.The group's international businesses is led by its overseas marketplace AliExpress which also expanded with 29% YoY sales growth.BABA is also looking to partner with European companies. Many European companies are still discovering new ways to enter the Chinese market, and BABA may enable them to connect with Chinese customers faster.BABA's mobile payment network, Alipay, is also seeking to expand in Europe. International growth will not only help increase the company's bottom line, but it will also enable BABA to diversify away from China, lowering the macro risk of BABA stock. The Bottom Line on BABA StockAlibaba stock has multiple catalysts to drive growth in the coming years. Its core marketplace operations provides the group with strong cash flow. In other words, eCommerce, cloud computing, and other investments throughout China and globally make it a disruptor and a sound long-term investment.In China consumer disposable incomes are going up, fueling growth in many sectors, including eCommerce. In fact, the e-commerce market in China is forecast to almost double within the next four years to reach $1.8 trillion. Therefore, even if the Chinese economic growth pauses for a few quarters to come, the country's growth potential is intact.Therefore long-term investors should view any decline in Alibaba stock as a good opportunity to buy into the shares.However, traders with a short-term horizon should remember that there might be further choppiness and even profit-taking in Alibaba stock. The daily volatility of Alibaba stock is high, giving it a wide trading range, so short-term traders should proceed with caution.As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 CBD Stocks to Buy That Are Still Worth Your Investment Dollars * 5 Stocks to Buy With Great Charts * 5 Goldman Sachs Stocks to Buy with Over 20% Upside Potential The post Despite Volatility, Right Now Is the Time to Get into BABA Stock appeared first on InvestorPlace.
Is there a way to know when to sell stocks and take profits before they trigger multiple sell signals? Yes. Use the 10-day moving average.
(Bloomberg) -- Sign up for Next China, a weekly email on where the nation stands now and where it's going next.For decades, NetEase Inc. has been the perennial runner-up to the likes of Tencent Holdings Ltd. in China’s evolving internet landscape. Now it’s betting on a bookish computer scientist to catapult it to the top of the class in the nation’s $36 billion online education market.Zhou Feng, chief executive officer of NetEase Youdao, is charged with helping NetEase escape from under Tencent’s enormous shadow and find life beyond video games. The U.S.-trained software coder handpicked by billionaire founder William Ding Lei is creating an all-in-one learning platform to tap the lucrative space where education and technology overlap. To bankroll that expansion, the company could float Youdao, last valued at $1.1 billion, as soon as this year.Zhou is counting on a decades-old custom. Every summer, millions of Chinese high school students sit through a grueling two-day college entrance exam, or gaokao, that helps determine the course of their lives. That’s why China’s tiger moms and dads have long sent their kids from as early as kindergarten age to private tutoring classes for English, math and sciences.Intense competition has fueled an education boom, particularly targeting the K-12 group that includes students from kindergarten through high school, creating a coterie of multi-billion-dollar corporations. Leading players like New Oriental Education & Technology Group Inc. and TAL Education Group that still rely mainly on in-class teaching have gone public in the U.S. and seen their shares soar. Online startups such as the Tencent-backed VIPKid are still trying to convince parents that digital instruction can be as good, if not better than brick-and-mortar classrooms.Through combining content with the latest technology, Zhou sees a business chance for Youdao, whose name loosely translates to “there’s a way”. Courses can be taught through high-speed live-streaming, enabling smooth communication between teacher and student. Artificial intelligence-powered “tutors” can grade homework and use data to evaluate student test results, he said.“That’s what we have always been good at,” said Zhou, 40, a University of California at Berkeley alumnus with a penchant for blending English words into conversations. “Almost every industry in China has been transformed by the internet, but that’s not yet the case for education.”Revenue for China’s online education market is estimated to have reached around 252 billion yuan ($35.7 billion) in 2018, and is expected to more than double in 2022, with 264 million paying users, according to iResearch.But there’s yet to be a clear winner -- even for top tuition providers like New Oriental, its digital arm Koolearn in 2017 only accounted for less than 1% of the total revenue in the local online teaching market, according to Frost & Sullivan data cited in its prospectus. What sets Youdao apart is its exclusive focus on online and its expansion into education-related hardware. It has launched a slew of products from apps for note-taking and children’s stories to smart devices like a 799 yuan electronic dictionary pen, which allows students to scan printed text and translate it instantaneously.“NetEase’s technology support and the company’s online DNA and roots should make its products more sophisticated than traditional education providers,” said Bloomberg Intelligence analyst Vey-Sern Ling. Still, not having physical classrooms means it could be difficult for Youdao to expand beyond structured, standardized learning or test prep, he said.NetEase could do with a win. Founder and CEO Ding has a master plan for China’s second largest game developer to delve into three sectors including e-commerce, music streaming and online education, but the result is best described as mixed. Its music arm has grappled with rising content costs, as it has to sublicense a large chunk of songs from its much bigger rival, Tencent Music Entertainment Group. Although e-commerce has grown to become NetEase’s largest division after gaming in terms of revenue, it sold its popular import platform Kaola to Alibaba Group Holding Ltd. in a $2 billion deal.That magnifies the importance of Youdao and its leader, with whom Ding shares a long history. Back in 2004, when Zhou was pursuing his doctorate degree in computer science, NetEase’s CEO came across his paper on filtering junk emails, and, ironically, shot him a message that was mistaken as spam. It had no body text but just a subject line: “I’m Ding Lei, I have a technical question for you.”The two eventually got in touch via phone calls, and Zhou worked part-time for NetEase for three years. After earning his doctorate in 2007, he officially joined the company as lead architect for Youdao in Beijing, which at the time was trying to morph from a digital dictionary into a web search engine. To challenge the local leader Baidu Inc., Youdao’s approach was to operate a slew of vertical search services at one time, in everything from news to blogs to maps.Those efforts failed, and in 2012 Zhou decided to close the search operation. “That was when we hit our lowest point,” he said. Zhou shifted the 400-person team to develop learning apps instead.Youdao’s revenue rose 60% in 2018 from a year earlier, while sales for K-12 courses increased three-fold in the same period, he said. Online courses have surpassed advertising as Youdao’s largest income stream, Zhou said.Now of the nearly 2,000 employees Zhou oversees at Youdao, half are teachers and other staffers dedicated to building up its online class portfolio. “Learning is much more difficult than playing video games,” he said.To contact the reporter on this story: Zheping Huang in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
It would seem like the news has been pretty good of late for Alibaba Group (NYSE:BABA) stock … with one obvious exception. The last two earnings reports have looked impressive. The overhang of a major stockholder is ending. And yet Alibaba stock has stayed stuck, trading sideways since February.Source: Nopparat Khokthong / Shutterstock.com To be sure, the U.S.-China trade war presents an apparent stumbling block in front of BABA stock. But rival JD.com (NASDAQ:JD) has outperformed Alibaba shares of late, while facing the same trade-driven macro headwinds at home.JD isn't the only Chinese stock with better returns. Yes, Alibaba Group shares have returned 27% so far this year. That's better than the 16% average of China's 21 U.S.-listed large-cap (>$10 billion) stocks. But that return puts BABA stock just seventh in the group, well behind leaders New Oriental Education & Technology Group (NYSE:EDU) and Pinduoduo (NASDAQ:PDD), the latter of which has almost doubled in the last two-plus months.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSo, relative underperformance, a cheap valuation, and Alibaba's market-leading status would seem to clear a path for BABA stock to finally break through $200 and beyond. After all, it's hard (though not impossible) to see external conditions being much worse, yet Alibaba has grown earnings and Alibaba stock has managed to rise.That path is open. But the concern has to be that if BABA shares stay stuck, it could signal they're going to be stuck for a very long time. What's Gone Right (and Wrong) for Alibaba StockAlibaba Group has had some headwinds in 2019. The trade war has pressured consumer and business confidence in China, as several companies have noted in recent months. Protests in Hong Kong have only added to the geopolitical risk, and likely led to Alibaba's decision to delay its listing on the Hong Kong exchange. * 7 Deeply Discounted Energy Stocks to Buy Major shareholder Altaba (NASDAQ:AABA) is liquidating its Alibaba stock. According to Alibaba's second quarter release, that company (formerly Yahoo!) sold almost 10% of Alibaba shares outstanding between May 20 and August 9.There are pressures on the business and pressures on the stock. And yet Alibaba has posted strong back-to-back earnings reports. Revenue increased 51% year-over-year in the fiscal fourth quarter (ending March) and another 42% in Q1. Adjusted EPS handily beat Street estimates in both quarters.Meanwhile, BABA stock hasn't exactly soared -- but it's held up. The stock bounced from levels around $150 in late May, amid the Altaba selling, and has neared $180 three times in the past few weeks.Given those external pressures, the case for BABA stock here is that in a tough environment, investors still were happy to buy and/or own shares. So what happens when that environment gets better? After all, Altaba's liquidation is likely over at this point. The trade dispute should be resolved at some point, even if that point isn't necessarily anytime soon. Put another way, it seemingly only can get better for Alibaba Group, and for Alibaba stock, from here. Long-Running Concerns About BABA StockThe catch is that for some investors, it's not going to get better for BABA stock. To bears, Alibaba has significant structural problems. Its VIE structure -- shareholders actually own a piece of a variable interest entity in the Cayman Islands, not Alibaba itself -- makes BABA a no-go for some investors.Accounting issues have long dogged the company. They were raised again in the decision to go forward with the Hong Kong listing. As I noted at the time, it was strange for Alibaba to sell stock at seemingly cheap prices to raise capital when it had plenty of cash already. Indeed, the company is paying $2 billion to acquire Kaola from NetEase (NASDAQ:NTES), a deal it is financing from cash on hand. * The 8 Worst Stocks to Buy Before the Trade Turmoil Cools Off There have been worries about self-dealing, highlighted by Alibaba's move of Alipay to former CEO Jack Ma. And many investors ignore Chinese stocks altogether, worried about a "hard landing" or, worse, an implosion of the economy still run by a nominally Communist single party. Can Alibaba Group Stock Finally Rally?Those skeptics admittedly could be wrong. "Hard landing" predictions, for instance, have been made for at least this entire decade. The VIE structure could change once Chinese regulations do. And, to at least some extent, a 20x forward P/E multiple incorporates those risks.But at least for now, those skeptics and that skepticism seem to matter. They're at least one reason why a proverbial lid has stayed on BABA stock. (Shares at this point haven't moved for two years now.) They're why, to some investors, Alibaba stock seems like a generational opportunity: an e-commerce leader in a country with over a billion citizens trading at a discount to many U.S.-based large caps with minimal growth. Other investors simply see the stock as a trap at almost any price.If the news around Alibaba stock gets better, particularly with the Altaba overhang gone, BABA stock has to rally. Otherwise, BABA starts to look like a stock that looks cheap - and will always look cheap, given the structural risks assigned by the market. As bearish as I've been on BABA, I can see that path to $200+. If Alibaba stock doesn't take that path, however, it might be time to worry.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Sell in Market-Cursed September * 7 of the Worst IPO Stocks in 2019 * 7 Best Stocks That Crushed It This Earnings Season The post If Alibaba Stock is Going to Rally Again, Now is the Time appeared first on InvestorPlace.
Two of China’s leading e-commerce platforms for imported goods are merging into one, and Alibaba Group Holding will further strengthen its leading position in the cross-border marketplace.
Alibaba Group Holding Limited (NYSE: BABA ) has acquired NetEase, Inc. (NASDAQ: NTES )'s import e-commerce platform Kaola for $2 billion. Alibaba plans for Kaola to continue to operate independently under ...
(Bloomberg) -- Alibaba Group Holding Ltd. bought NetEase Inc.’s Kaola e-commerce platform for about $2 billion and invested in its music streaming service, forging a rare partnership between two of China’s largest internet giants.The deal hands Alibaba the biggest Chinese online marketplace for foreign brands after its own Tmall Import and Export. Kaola will now operate independently but under new Chief Executive Officer Alvin Liu, a Tmall veteran. Separately, Alibaba and billionaire co-founder Jack Ma’s Yunfeng Capital will invest $700 million in NetEase Cloud Music. NetEase remains the controlling shareholder of its music app.Alibaba and NetEase -- both based in the prosperous eastern city of Hangzhou -- have long fought social media titan Tencent Holdings Ltd. across several fronts but the landscape is shifting. The emergence of Tencent-backed rivals like Pinduoduo Inc. is testing Alibaba’s dominance of retail. NetEase has long been a distant runner-up to Tencent in gaming and now also music streaming, while Alibaba has its own music app Xiami. The sale of the low-margin Kaola platform now allows NetEase to focus on its bread-and-butter gaming business.“NetEase can further optimize its costs while Alibaba strengthens its leadership in cross-border e-commerce,” Thomas Chong and Ken Chong, analysts at Jefferies, wrote Friday. “On the other hand, we believe NetEase Cloud Music can benefit from potential synergies with the Alibaba ecosystem.”Read more: Tencent Music Dives as Watchdog Probes Its Record-Label TiesThe Kaola deal creates a dominant bazaar for consumers seeking foreign labels and goods. Alibaba and Kaola, which is loss-making on an operational level, controlled almost 60% of all transactions on China-based platforms for foreign brands in the second quarter, according to research firm Analysys.It also deepens a seeming alliance. NetEase founder William Ding and Alibaba CEO Daniel Zhang exchanged good-natured banter during a long TV interview aired in China just last month. Asked about their rivalry, Ding joked: “Many of our employees might be husbands and wives.”What Bloomberg Intelligence saysAlibaba’s $2 billion acquisition of Kaola, NetEase’s cross-border e-commerce platform, will make it the go-to channel for Chinese consumers seeking high-quality foreign products.\-- Vey-Sern Ling and Tiffany Tam, analysts-- Click here for the researchThe investment will prove welcome to NetEase, which like Alibaba has grappled with rising content costs.NetEase Music most recently raised $600 million in November when Baidu Inc., General Atlantic and Boyu Capital participated in a fundraising round. The latest capital injection comes after China’s antitrust authority launched a probe into its much larger rival, Tencent Music Entertainment Group, over its licensing practices. Under government pressure, Tencent Music and NetEase Music last year agreed to relicense more than 99% of their music catalogs to each other.“What really matters is the 1% exclusive content,” said Shawn Yang, a Shenzhen-based analyst with Blue Lotus. “Now that NetEase has new funding that can be used to buy copyrights, it will definitely be a threat to TME.”(Updates with analysts’ comments in the fourth paragraph)To contact the reporter on this story: Zheping Huang in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The Chinese tech giant nabs a big asset from a compatriot, while the athleisurewear company surprises on the upside.
Alibaba Group has acquired NetEase Kaola for $2 billion, the two companiessaid today, and will integrate it into Tmall, creating the largest cross-border e-commerce platform in China
Alibaba Group has agreed to buy e-commerce business Kaola from Chinese gaming company NetEase for $2 billion, adding a platform that specializes in supplying curated luxury goods from abroad to domestic consumers. Alibaba, which is looking for new revenue drivers as the e-commerce market at home matures, will also invest $700 million for a minority stake in Netease's music streaming arm as it takes on Chinese market leader Tencent Music.