173.28 +0.29 (0.17%)
After hours: 7:52PM EDT
|Bid||173.00 x 2900|
|Ask||173.18 x 1000|
|Day's Range||172.99 - 175.15|
|52 Week Range||129.77 - 198.35|
|Beta (3Y Monthly)||1.84|
|PE Ratio (TTM)||49.47|
|Earnings Date||Aug 21, 2019 - Aug 26, 2019|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||217.88|
On a sum-of-the-parts basis, the shares are arguably priced as much as 50% below the Japanese company’s underlying asset value.
In 2016, Xiaomi appeared to be on the verge of collapse. The company has since risen like a "Chinese phoenix," but it still faces challenges in the tough smartphone market.
Alibaba (BABA) has been upgraded to a Zacks Rank 2 (Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.
(Bloomberg) -- Sign up for Next China, a weekly email on where the nation stands now and where it's going next.Less than a year after President Xi Jinping first touted the project, China’s new stock venue designed for technology startups will start trading on Monday.Twenty-five companies will be part of the launch in Shanghai, out of the more than 100 hopefuls that applied to go public on the platform. Endorsement from top officials helped generate such enthusiasm that the firms raised a combined $5.4 billion, about 20% more than planned. Demand from retail investors has outstripped supply by an average 1,800 times, even as some analysts voiced concern over lofty valuations. One company priced its shares at 171 times earnings.“The first-batch listings are expected to be boosted by investor demand,” said Mark Huang, an analyst at Bright Smart Securities. “There’s a good chance we’ll see a rush into these stocks due to the limited supply.”Modeled after the Nasdaq Stock Market in the U.S., the so-called STAR board is China’s latest attempt to avoid losing the next Alibaba Group Holding Ltd. or Tencent Holdings Ltd. to exchanges in New York or Hong Kong. It’s also a testing ground for regulators, who have waived rules on valuations and first-day price limits for the first time since 2014. The venue will be the first in China to welcome companies that have yet to make a profit, as well as shares with unequal voting rights.The listing companies include China Railway Signal & Communication Corporation Ltd. -- already listed in Hong Kong -- and gastrointestinal equipment maker Micro-Tech (Nanjing) Co. Ltd. Advanced Micro-Fabrication Equipment Inc., which sells products used to make semiconductors, is the most expensive stock of the batch. Its 171 multiple compares with an average of 53 times for the group, and 33 for similar stocks on other Chinese venues.A handful of stocks linked to the first batch advanced on Friday, showing investor enthusiasm ahead of the new board’s debut. And another two firms joined the queue to list: Amlogic (Shanghai) Co. and Shanghai Friendess Electronic Technology are aiming to raise a combined 2 billion yuan ($291 million), according to their prospectuses.Despite the hype, there are questions about whether the excitement will give way to the lukewarm sentiment that’s blanketing the world’s second-largest equity market. On the other hand, a sustained period of ultra-high demand risks draining funds other exchanges, where volumes are shrinking. Mainland markets sank earlier this month after China announced the STAR board’s official start date. The Shanghai Composite Index rose 0.8% on Friday.It’s not the first time China has sought to create an alternative venue for smaller companies. The ChiNext board was launched in Shenzhen almost a decade ago with fewer listing requirements than the main venues. The tech-heavy exchange was at the center of a spectacular boom and bust in 2015 that burned hordes of novice traders. Officials will be keen to avoid such extreme volatility -- the ChiNext remains more than 60% below its peak four years ago.Shares on the STAR board will have no daily price limits for the first five trading days, followed by a 20% cap in either direction. To limit volatility, the venue will feature a mechanism that suspends activity for 10 minutes if a stock moves by 30% and then 60% from the opening price in the first five trading days, a wider band than the rest of the stock market.The STAR board’s launch dovetails with Beijing’s pledge to boost direct financing for companies struggling to raise funds, and has taken on added significance as heightened trade tensions with the U.S. threaten China’s technology supply chain.“It’s one of China’s key strategies to support technological innovation,” said Zhang Yankun, fund manager at Beijing Hone Investment Management Co. “If investors can get decent returns from these listings, it would attract more money to the sector and help China’s capital market compete with developed markets.”(Updates with stock moves in sixth and seventh paragraphs.)\--With assistance from Irene Huang and Lujia Yu.To contact Bloomberg News staff for this story: Ken Wang in Beijing at email@example.com;Evelyn Yu in Shanghai at firstname.lastname@example.org;Fox Hu in Hong Kong at email@example.com;Ludi Wang in Shanghai at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com;Sam Mamudi at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Forget medical school and engineering degrees. With a record 8.3 million university graduates this year, Beijing is urging its best and brightest to take up competitive video-gaming. ESports professionals can make triple the national average salary, according to the Ministry of Human Resources and Social Security. As the economy slows, pouring resources into China’s night-shift GDP might just be wacky enough to work. Municipal governments have taken the hint, luring gaming clubs with cash handouts and other perks. The resort island of Hainan is setting up a 1 billion yuan ($150 million) development fund and giving up to 10 million yuan in subsidies for international tournaments. Shanghai’s Yangpu district offers a 30% rental discount to businesses in the sector.The push has made unlikely pairings of 60-year-old local bureaucrats and thirtysomething eSports executives, who’ve been forced to ditch their PowerPoint presentations for formal government memos. Pan Jie, nicknamed “the Queen” among China’s professional gamers, has learned that Bohemian dresses and video-game T-shirts don’t go over well when officials visit the Hangzhou headquarters of her club, LGD-Gaming, one of China’s largest.With government support, Pan Jie’s dream of operating her own eSports stadium is getting closer to fruition. Still, you’d be forgiven for doubting that layers of statist procedure can springboard the competitive video-gaming sector, particularly when China’s private enterprises are already struggling to get the funding they need. Having scouted venues across China, Pan Jie settled on a plot of land on the outskirts of Hangzhou, within a shantytown development zone located in the Xia Cheng district. Beijing has been working to revive these areas since 2015, with the central bank flying in more than 3.5 trillion yuan of helicopter money to support such projects through pledged loans. The Xia Cheng district is hoping that a new eSports park – along with the tourism and tech jobs it can generate – will bring in over 1 billion yuan, more than 10% of the 8.9 billion yuan in fiscal revenue it collected in 2018. Judging from a publication by the district’s news office, officials seem to have outlined concrete policies rather than grand promises. Indeed, the local government was quick to act, tearing down old residential buildings to make space for the new construction, which will eventually house up to 1,000 startups. To help LGD-Gaming move into the new center by its May deadline, officials even called furniture shops late at night, demanding employees work overtime to meet the company’s needs. A handful of bureaucrats temporarily stationed at the park have been assigned as startup liaisons.Whether Xia Cheng can meet all the grand expectations is a big unknown. Hangzhou is home to China’s wealthiest businesses, including Alibaba Group Holding Ltd. Yet not all areas are created equal. Last year, Xia Cheng’s GDP grew 6.1% to 93 billion yuan, not even half that of the tourist district of Yu Hang. Meanwhile, Xia Cheng has entrenched business interests to deal with. Smack at the center of the eSports zone is a huge, five-story warehouse occupied by Zhejiang Food Stuff Corp., a provincial champion known for its cured ham. The district has to wait for the company to build another site before any demolition work can begin. For the time being, startups have occupied a small corner of the redevelopment zone, and Shenzhen-based Quantum Capital, a venture-capital firm, postponed opening a branch there. Over the next five years, China’s competitive video-gaming industry can absorb close to 2 million workers, according to the Ministry of Human Resources. But throwing cash at an idea isn’t enough. Bureaucrats will need to show that they can work effectively with what they once called the “lost souls” of the gig economy. During a recent visit to LGD-Gaming, one official pooh-poohed a hipster barbecue joint inside the eSports park: Grilling lamb chops on an open pit? How undignified, he apparently complained. The business was shut within days. “We were sad for a while, because their lamb tasted great,” Pan Jie lamented.To contact the author of this story: Shuli Ren at email@example.comTo contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
When it comes to the digital ad market, Alibaba (NYSE:BABA) is doing everything it can to drive Alibaba stock higher. Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading TipsRemarkably, in the digital-ad sector, Alibaba is beating Amazon (NASDAQ:AMZN) at its own game. Over the long-term, that will greatly boost the BABA stock price. * 7 Stocks Top Investors Are Buying Now But first, here's the back story. Amazon's Ad GrowthOne of the big stories about Amazon in 2019 is how well the e-commerce giant is doing in the digital-ad market. Although the space has long been the exclusive domain of Google and Facebook (NASDAQ:FB), Amazon has managed to elbow its way into the mix in relatively short order. That's one of the many reasons why Amazon's stock is up 32% in 2019. As the e-commerce company's core retail business has slowed, Jeff Bezos and company have worked to find new sources of growth. The digital-ad market happens to be one of those growth areas. Estimates suggest Amazon's annual-digital-ad revenue over the next five years will jump to $40 billion, up from $10 billion in 2018.Alibaba also has a reasonably strong and growing ad business. In fact, its ad business is larger and growing more rapidly than Amazon's. I wouldn't buy Alibaba stock solely for this reason. However, it certainly should make investors think twice about choosing Amazon over BABA stock.. China vs. AmericaeMarketer estimates that Alibaba's digital-2019 ad revenues will come in at $29.2 billion, more than double that of Amazon. That puts BABA in third place in global digital-ad revenue, behind Facebook and Google, which are expected to generate digital-ad revenue of $67.4 billion and $103.7 billion, respectively. Alibaba's digital ad revenues are so substantial that the fifth, sixth, and seventh-largest sellers combined are expected to generate $30.4 billion of digital-ad revenue, just 4% more than Alibaba. Yet, all anybody can talk about is how great Amazon is doing in the advertising business. I think it's time to give Alibaba its due. That's especially true in light of the differences between the Chinese and U.S. digital ad markets. China's digital-ad spending is expected to grow from $65.4 billion in 2018 to $134.3 billion in 2023. In 2019, the country's digital-ad spending is expected to increase by 22% to $79.8 billion,. In the U.S., digital ad spending is projected to grow from $108.6 billion in 2018 to $201.8 billion in 2023. That's meaningfully slower growth than in China. The Bottom Line on Alibaba StockOn the one hand, the fact that Alibaba controls over a third of all Chinese digital advertising is an impressive statistic. On the other hand, Amazon is a major participant in the U.S. digital ad market, which is expected to grow almost as quickly as China's over the next five years. Additionally, AMZN only has 9% of the entire U.S. market at the moment. It's much easier to go from 9% to 18% than it is to go from 35% to 70%. From that perspective, some could surmise that Amazon's got an easier growth path when it comes to the digital-ad market.However, that viewpoint assumes that Alibaba won't make any headway in digital ads outside of China. I believe that's much too pessimistic, given the company's international expansion possibilities. So, the owners of Alibaba stock should continue to pay attention to BABA's advertising business because BABA just might have an even better opportunity in that area than Amazon does at this point. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks Top Investors Are Buying Now * The 10 Best Cryptocurrencies to Keep on Your Radar * 7 Marijuana Penny Stocks That Could Triple (But You Won't Make Money) The post Alibaba Stock Can be Boosted by Digital-Ad Growth appeared first on InvestorPlace.
Online retail is booming, a sector with $680 billion in annual sales and growing at nearly 10% per year. This is the fertile ground that has made Amazon.com (AMZN) so profitable, drawing in investors and pushing the share price close to $2,000.Amazon’s dominance in the niche is not unchallenged. From China, comes Alibaba (BABA), the competitor with a domestic customer base over one billion strong. China’s fast-growing e-commerce sector has made Alibaba a winner, in a market with 20% of the world’s population and at $12 trillion, 15% of the world’s economy. This is a solid foundation.Both companies got their start in the 1990s, have established successful branding on their home turf and beyond, and now are rubbing shoulders uncomfortably in the global markets. But which one is better for investors? Amazon.com, Inc. (AMZN)The reigning champion of online retail is Amazon. The giant’s $990 billion market cap makes it the world’s second largest publicly traded company, and its annual revenues of $232.9 billion make up 34% of the global total of online retail.On July 15 and 16, Amazon held its annual Prime Day event, a two-day, members-only sale that generated record purchases. While the company does not release sales revenue figures until the quarterly reports, a company press release did state that Amazon Prime customers purchased more than 175 million items during the 48-hour period, making Prime Day’s sales numbers bigger than last Black Friday and Cyber Monday put together.Amazon’s Prime Day success follows Loop Capital’s Anthony Chukumba’s July 15 prediction. The analyst said that he expected a “highly successful” event, adding that, “The event is an opportunity to highlight Amazon's launch of one-day delivery for Prime members as it serves the purpose of generating significant volume during the seasonally slow time of the year and driving incremental Prime subscriptions.” Chukumba’s buy rating and $2,380 price target suggest a 19% upside to AMZN shares.John Blackledge, of Cowen, agrees with Chukumba about Amazon’s potential for investors. He looks farther ahead than Prime Day, however, saying that he expects the company’s Q2 earnings report on July 25 to exceed the $5.10 EPS forecast. He says, “We expect revenue and unit growth to accelerate from 1Q19 levels. We forecast 2Q19 reported revenue of $63.4BN… Our revenue forecast is 1.5% above consensus and near the high end of guide range…” His sets a bullish price target of $2,500, implying an upside of 25%.Overall, Amazon holds a strong buy rating from the analyst consensus, based on 35 buys and 1 hold assigned in the last three months. The stocks average price target of $2,250 gives a 12.9% upside from the current share price of $1,992. Alibaba Holdings Ltd. (BABA)Alibaba is working hard to build a presence outside of China. The company’s Ali Express platform, for international orders, is growing in popularity. As a challenger in the global online retail space, however, Alibaba started from a smaller base. Despite China’s huge population, it is only in the last decade that the country’s economy truly begun takeoff. So, even though Alibaba currently has a solid domestic support, with access to more potential customers in the home market than Amazon has, BABA’s market cap of $450 billion is just under half that of Amazon’s, while the share price of $174 is only 9% of the American company’s. The disparity is visible in annual revenues, too. Alibaba brought in $56 billion in its last fiscal year, about one-fourth of Amazon’s $232 billion.None of this means that Alibaba is in a worse position than Amazon, only that it is a smaller company. Alibaba has followed a different path to success; where Amazon controls every aspect of its business, from the online platform to the supply line to the shipping warehouse to the deliver, Alibaba is a sales platform that arranges shipping. It keeps down overhead, which in turn helps level the field for the underdog.Underdog is another relative term, however. As in the business model, Alibaba is also pursuing a different stock-return model. Where Amazon keeps its total number of share outstanding low, at about 500 million, Alibaba has 4 billion ordinary shares. In addition, as part of its move to make an IPO in Hong Kong, Alibaba management proposed a 1 to 8 stock split that would reduce the price per share and increase the number of shares outstanding to a whopping 32 billion. It’s a move to encourage sales, and raise fresh capital. Estimates are, the company can raise as much as $20 billion by listing in Hong Kong. The stock split proposal was approved by shareholder vote, overwhelmingly, on July 15.Writing ahead of the shareholder vote, Citigroup’s Alicia Yap describes the split as “necessary” for a successful Hong Kong listing. She believes that company management approach the mechanics of the split with care, to “minimize the dilution impact to existing shareholders.” Of the organizational change as a whole, she says, “This latest reorganization upgrade once again demonstrates the focus of Alibaba’s management and its determination in improving strategic direction and growth opportunity…” Yap rates BABA as a buy, and puts a $229 price target on the stock, a 31% upside from current levels.Raymond James analyst Aaron Kessler agrees with the positive outlook on BABA. Focusing on long-term trends, he says: “Alibaba remains our top large cap pick, given we expect continued solid China ecommerce growth with Alibaba as the biggest winner… and that we believe valuation is attractive at ~10x 2020 marketplace EPS…” Kessler sets a $280 price target to go with his buy rating, indicating his confidence in an eye-catching 60% upside for BABA shares.Like Amazon, BABA shares hold a strong buy rating from the analyst consensus. Shares are currently selling for $174, so the $220 average price target suggests a 26% upside. Expect those numbers to change in the mid-term future, however, as the approved stock split must take place before July 15, 2020. At the current valuation, a 1 to 8 split will give each share a price of $21.75. Which Stock Measures Up?So which online retail giant is the better buy? Both companies show solid earnings and have a stable foundation for current and future business. Amazon has far and away the higher cost of entry, but the share price is high enough that, even with a lower upside potential, the gains in absolute numbers are likely to outweigh BABA’s. Alibaba, however, offers impressive upside potential combined with far lower share price – and that share price will decline sharply within a year, without reducing the upside.From an investor’s perspective, AMZN is the premium buy while BABA is the budget alternative. Think of the difference between driving a Mercedes and a Honda – the Mercedes will outperform, but the Honda may bring a better value per dollar.
Michael Kors, the namesake brand established by the world-renowned, award-winning designer of luxury accessories and ready-to-wear, today announced that it will open its digital flagship store on Tmall, which will be featured on Tmall Luxury Pavilion, Alibaba Group’s dedicated platform for luxury and premium brands. The new online store marks the first third-party partnership for Michael Kors in China and will provide Tmall customers in China with exclusive access to special products launched only on Tmall as well as the entire range of Michael Kors women’s and men’s products. “We are excited to launch our new Michael Kors digital flagship on Tmall and Tmall’s Luxury Pavilion.
The goal of this article is to teach you how to use price to earnings ratios (P/E ratios). To keep it practical, we'll...
Much of the direction that Alibaba (NYSE: BABA) stock takes depends on the trade talk progress between the U.S. and China. So when the two countries agreed on a temporary truce that would prevent further new tariffs, Alibaba stock bounced.Source: Shutterstock The stock bottomed at $150 at the start of June but just recently broke above some 50-day and 200-day technical resistance at around $165.Though the earnings report is still nearly a month away (set for Aug. 14 before the market opens), what are the near-term positive catalysts?InvestorPlace - Stock Market News, Stock Advice & Trading Tips Higher Liquidity in Alibaba StockThe Altaba (NASDAQ: AABA) shareholder approval of complete liquidation on June 27 will increase the stock liquidity. Take the Vivendi scenario as a case study to predict what happens next with BABA stock. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip Vivendi, once a major shareholder in Activision (NASDAQ: ATVI), sold an $8.3 billion stake in 2013 and then the rest of its stake for $1.1 billion in 2016. This lifted a major overhang for Activision and helped lift the stock. It just happened that the demand for gaming grew steadily in those years, but the improved share liquidity cannot be ignored. When a major stockholder liquidates its Alibaba stock, expect trading to increase.Altaba shareholders might want to switch to BABA stock ahead of the liquidation. Altaba trades at a discount to the value of Alibaba stock because the market is already discounting the massive capital gains tax the holding company will face. Conversely, investing in Alibaba is attractive even at current levels. At a 20 times forward P/E, the other valuation multiples will fall when the company reports quarterly earnings that easily beat market consensus estimates.On July 15, Alibaba proposed splitting its shares one-to-eight. The lower price per share will attract investors who previously would prefer not to hold a $173.50 share. They would prefer holding eight shares at $21.69. Strong Growth ExpectedIn the fiscal fourth quarter, Alibaba reported earnings of $1.25 a share as revenue grew 39.6% to $13.6 billion. The company grew strongly after taking a number of initiatives. It attacked counterfeiting by forming the Alibaba Anti-Counterfeiting Alliance in 2017.The group now has 132 global brand companies stemming from 16 countries in 12 diverse industries. Despite criticisms of Intellectual Property (IP) theft and copying in China, China took steps to protect against IP infringement in recent years. Alibaba aligned its corporate values to that of China's by protecting IP.Alibaba targeted its business so its products resonate with China's middle class. China now has a middle-class population of 300 million. Domestic consumption is $5.5 trillion today. But looking ahead, demand from the lower-tier (third, fourth, and fifth-tier) cities will triple from $2.3 trillion to almost $7 trillion in the next decade.Operationally, Alibaba has scale and effectiveness that competitors cannot match. For example, its Tmall cross-border commerce platform widens its addressable market. Even while benefiting from domestic growth, it stands to grow its market giving overseas brands and merchants a way of selling to Chinese consumers virtually. Alibaba's Partnerships with Big BrandsAlibaba partnered with Starbucks (NASDAQ: SBUX) to establish a strong brand presence in China. It did this through Alibaba's mobile-ready China retail marketplace. This allows Starbucks to expand its physical presence while building achieving customer engagement and acquisition through its mobile app.In the last fiscal year, Tmall's use of proprietary insight technology and marketing tools helped merchants grow their customer base. Over 1,200 brands each acquired an incredible 1 million new customers on its platform. And in the fourth quarter, customer management revenue grew 31% from last year.A bigger user base combined with better conversion rates, plus trendy new brands led to higher fees collected. Instead of aiming to monetize recommendation fees further, Alibaba will re-invest the earnings to grab more of the market. It is determined to win customers from cities that are Tier 3 and below. Valuation and Your TakeawayAlibaba exhibited strong commission and customer management commerce revenue growth. If the pace of growth matches that achieved in Q3/2019, Alibaba stock will trade higher.Source: BusinessQuantAnalysts have a price target that is 27% above the recent $173.50 closing price (per tipranks). At ~$221, the analyst valuation may prove too optimistic. Conservative investors may assume a perpetuity growth rate of ~4.0% instead. Per finbox.io, that implies the stock's fair value using a 5-year DCF Growth Exit model is just below $210 a share.As of this writing, Chris Lau did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post The Future Just Looks Better and Better for Alibaba Stock appeared first on InvestorPlace.
Though Alibaba Group Holding (NYSE:BABA) was founded and grounded on an industrial revolution that drew hordes of people from rural China to its major cities, most owners of Alibaba stock know the company's future growth lies outside of those urban areas. Outlying second-tier cities and even minor villages are finally catching up with their more metropolitan peers, particularly in terms of communication.Source: Shutterstock What's the great irony -- and potential problem -- in that paradigm shift? A shrinking rural population. The China National Bureau of Statistics reported earlier this year that the country's rural areas saw 13 million people leave for more opportunity in 2018. Many of those leaving were among the most promising income-earners that could find more rewarding employment elsewhere, taking their discretionary income with them when they left.Now, with China's economic growth falling to a 27-year low as of June, the already-imbalanced trickle-down upside of the nation's new economic engine is further jeopardized. A shrinking population, particularly among working aged people, only exacerbates the concern.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIt's a paradigm that calls into question just how much growth Alibaba can truly expect to find in China's more remote areas. It's a paradigm that also quietly weighs on the BABA stock price, even if most owners of Alibaba stock don't fully realize it the full scope of the brewing storm.There's a narrow pathway starting to appear through the distant fog, however. China's Big Cities Attract Rural WorkersIt's not a challenge its U.S. rival Amazon.com (NASDAQ:AMZN) ever had to contend with, though for the record, Alibaba rivals like JD.Com (NASDAQ:JD) and Baozun (NASDAQ:BZUN) are largely in the same boat.That is, China is a huge country, and for as much work that's been done to improve incomes outside of its biggest cities, its rural population continues to shrink after being eclipsed by metropolitan populations back in 2011. Those urbanites take their discretionary incomes with them, dragging down rural economic activity faster than redistribution efforts can boost them. The undertow takes some of the strategic shine off of Alibaba's plans. * 7 Dependable Dividend Stocks to Buy China's lopsided economic revolution, however, may be on the verge of another tidal shift that once again works in favor of Alibaba stock. Urbanites are now moving back to more rural areas, taking jobs and discretionary incomes with them. China's Digital Economy 2.0On balance, China's biggest cities are still gaining workers at rural areas' expense. The trend is abating though. Last year, seven million people shed their yuppie status to return to rural areas. Almost two-thirds of that group did so to work on China's farms.Things have changed dramatically, even if unevenly, on China's pastoral landscapes. Though still rustic in some spots by most anyone's standard, the government's support via subsidies, the establishment of wireless telecom and internet service and the improvement of basic utilities are all improving the case for foregoing city life.The so-called reverse migration also has an element that will feel familiar to U.S. investors and inhabitants as well, however. The new rural population is doing business in a way their parents wouldn't have, and largely still can't.Case in point? Farmer Xu Pengfei and his business partner, an online-video celebrity of sorts who goes by the name Handsome, are promoting their produce grown in northern China's Yujin village. The videos are filmed with an iPhone, selling fruits and vegetables to consumers nowhere near their farm. Government reports suggests that half of all the people leaving China's cities are engaged in some sort of e-commerce, which transcends the physical limitations of distance.It's making a difference too, as these migrants are finding their incomes ultimately improve when they become rural entrepreneurs. * 10 Best Dividend Stocks to Buy for the Rest of 2019 and Beyond "[Returning migrants] have become a major driving force in closing the gap between Chinese cities and villages, and between the coast and inland," explains Cui Chuanyi, with Beijing's Development Research Centre of the State Council. Cui concludes "Much of China's future growth lies in these less-developed regions," jibing with a message Alibaba stock owners have been hearing for a while now.Those wealthier entrepreneurs also make for stronger consumers, but most noteworthy is the fact that Handsome's and Pengfei's preferred platform for selling produce online is Taobao, owned by Alibaba. Looking Ahead for Alibaba StockIt's not a reason in and of itself to step into BABA stock. It's a secular shift that could take years to play out. Much could change in the meantime, and not all would-be entrepreneurs have found moving out of the city is a recipe for fortune. Indeed, urban populations are still growing, and rural populations continue to shrink.On the other hand, even with a number of potential pitfalls still looming ahead for the e-commerce giant's rural focus -- like market saturation and logistical hurdles -- there's certainly argument to steer clear of Alibaba stock. As Barron's confirmed on Sunday about the company's rural ambitions, "Alibaba is growing fast there."As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Once an Urbanization Play, Alibaba Stock is Now a Good Bet on Rural China appeared first on InvestorPlace.
Investors have been keeping their eyes locked on the relationship between the US and China as the rhetoric spewing from the conflict has impacted the stock market for the over a year now.
The e-commerce giant has significant growth opportunities. One day, it could pay a dividend Continue reading...
Many people in the U.S. are unfamiliar with the e-commerce giant Alibaba (NYSE:BABA). However, Alibaba is one of the most important Chinese companies on the U.S. stock exchange. Alibaba shares have been on a rollercoaster over the past couple months due to increased trade tensions between the U.S. and China.Source: Shutterstock These tensions won't be resolved anytime soon, though they have temporarily cooled off. And since Alibaba's business model is tied directly to China, ongoing trade war concerns are largely overblown.BABA stock does have a number of headwinds working against it. But in my opinion, the potential rewards definitely outweigh the risks.InvestorPlace - Stock Market News, Stock Advice & Trading TipsHere are three reasons you should consider investing in Alibaba stock. 3 Reasons Why You Should Buy Alibaba StockThe company's fundamentals are strong: Alibaba has repeatedly downplayed the impact of the trade war, instead choosing to focus on the company's strong revenue results. Alibaba released its quarterly earnings report in May and both its sales and revenue exceeded investor expectations.Alibaba is similar to Amazon (NASDAQ:AMZN) in the way it continues to expand into new industries. The company is most successful in its e-commerce ventures but continues to expand into other markets. For instance, its cloud computing revenue rose 76% over the past year to reach $1.12 billion.Alibaba is also moving into the digital advertising and food delivery industries. The company also invested in the Sina Weibo, a Chinese microblogging company that's often compared to Twitter.The company is free cash flow generative: Unlike Amazon, Alibaba acts as a middleman in the e-commerce industry. This means the company doesn't house any inventory and doesn't have to navigate the logistics of shipping products to consumers.Since Alibaba's expenses are much lower, the company generates higher free cash flow than Amazon. This allows the company more discretionary spending so it can invest in additional growth opportunities and business ventures.Increased consumer spending in China: Many people are concerned that the Chinese economy will slow down in the coming years. However, its GDP continues to expand at an average rate of 6% per year. And it's likely that the Chinese middle class will continue to expand for a long time.In 2018, China's online retail sales hit $1.3 billion, which is an increase of nearly 24% year over year. And most impressive of all is that Alibaba accounted for 58% of these sales. The company currently has 576 million active users, which is bigger than the entire U.S. population.Not to mention, Alibaba has a long way to go before it reaches full penetration in China. Consumer spending in China will only continue to increase and there's little doubt that Alibaba stands to reap many of the rewards. Bottom Line on Alibaba StockAlibaba's shares have taken a hit in recent months, largely due to investors overreacting to trade war concerns. But considering the company's positive growth potential and the economic opportunities available in China, Alibaba stock is a strong investment going forward.As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post 3 Reasons Why Alibaba Stock Is Still a Solid Buy appeared first on InvestorPlace.
There are few companies that can match the profitability of Facebook (NASDAQ:FB).Source: Shutterstock In 2018, Facebook reported profits of over $22 billion, 40% of its $55 billion in revenue. Investors are paying more than 10 times revenue for that, based on the stock's price of about $204 per share and a market cap of $583 billion.But I covered such a company this week: Visa (NYSE:V). After bringing $10.2 billion to the net income line last year, Visa was worth over 20 times revenue as trading opened July 16 at $181 per share and a $406 billion market cap.InvestorPlace - Stock Market News, Stock Advice & Trading TipsElectronic money is so powerful that Visa is now worth more than JPMorgan Chase (NYSE:JPM), the largest U.S. bank, which has a market cap of $373 billion. * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip Visa is what Facebook wants to be when it grows up. Libra is how it gets there. Ensuring ComplianceAfter a month spent talking about Libra as cryptocurrency, Facebook plans to tell Congress this week that Libra is more like Visa.Libra has registered as a Money Services Business and says its blockchain will comply with U.S. regulations regarding money laundering and financing of terrorism.In a blog post, Libra co-creator David Marcus asserts the Libra blockchain's "know your customer" practices will be "a big opportunity to increase the efficacy of financial crimes monitoring and enforcement."This turns the paradigm of cryptocurrencies on its head. It makes transactions less anonymous and more difficult to hide than in the present system.The difference is that, while banks today have to police compliance at the teller's window, so to speak, Libra will make its blockchain available to police. Facebook will control neither the network, the currency, nor the reserve backing it. Its Calibra subsidiary will just be running digital wallets. Is That Enough?Whether that's enough for Democrats is an open question. The House Financial Services Committee is drafting legislation called the "Keep Big Tech Out of Finance" act, specifically aimed at keeping Facebook out of the money business.Even the rest of the tech industry doubts Libra will get off the ground next year as planned. The wallet has already been banned in India, where banks are forbidden from handling cryptocurrencies.Marcus has disposed of objections about money laundering, but economists now claim Facebook threatens to replace the dollar and other currencies. That's because the Libra Association, based in Switzerland, would hold reserves of various currencies to back Libra, acting as a digital central bank. If it's less expensive to run than a real central bank - and that's the whole point - it could replace national banks, according to economist Peter Morici. The Bottom LineThe blockchain paradigm, in which transactions are part of a central database, avoiding the costs of real money, has inherent cost advantages over the systems used by central banks and transaction processors like Visa.Libra's structure, transactions backed by a currency reserve, is similar to that of Alibaba's (NASDAQ:BABA) Alipay. Its costs are like those of India's Unified Payments Interface (UPI).What those two systems have are huge, unified markets to grow in. China controls Alipay, India controls UPI. Low-cost systems for electronic transaction processing exist, and unless the West gets in the game it could be buried by them.That's the card Facebook, and other "fiat" coins like JPMorgan Chase's JPM Coin, are going to be playing in order to go into electronic money. Let us in, they'll say, or China and India get the business.Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O'Flynn and the Bear, available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in JPM and BABA. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Retail Stocks Goldman Sachs Says Are Ready to Rip * 7 Services Stocks to Buy for the Rest of 2019 * 6 Stocks to Buy and 1 to Sell Based on Insider Trading The post Facebook's Libra Surrenders to Authority appeared first on InvestorPlace.
Alibaba stock has been a big winner since its debut in September 2014. With solid fundamentals and a bullish chart, the case for more upside is a strong one.
Despite a valuation that would give an Internet entrepreneur a nosebleed, Visa (NYSE:V) still has analysts pounding the table for it. Marketwatch, for instance, still counts 39 analysts on the Visa stock beat. Click to Enlarge Source: Shutterstock Of that number 30 have it rated a buy, and only one has it as low as an underweight on valuation. This despite Visa being up 31% in the first half of 2019.It's extraordinary faith for a company that now has a market cap of $406 billion on $20.6 billion in 2018 revenue. Expectations are for earnings of $1.33 per share when it reports July 23, with a "whisper number" of $1.37 per share, on revenue of $5.7 billion. The price to earnings ratio for the last four quarters is over 37.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAmong transaction processors, high valuations aren't unusual, but this is extreme. MasterCard (NYSE:MA) has a market cap of $285 billion on revenue of $15 billion. Square (NASDAQ:SQ) is worth $34 billion on 2018 revenue of $3.3 billion. * 7 Dependable Dividend Stocks to Buy The Bull Case for Visa StockWhat the bulls see is the end of cash and its replacement by Visa's payment system. They also see a company with a net margin of 50%. Last year $10.3 billion of its $19.9 billion of revenue hit the net income line.Bulls say Visa continues to innovate with Visa B2B Connect, a business payment system enabling seamless payment connections between international banks.They like its purchase of privately-held Verifi, for an undisclosed price, as a way to help merchants reduce chargebacks.They love a pilot program that will let merchants offer installment payments directly from their cash registers. They're even cheering the $75 million purchase of Rambus' token and smart-ticketing business, even though that business cost Rambus itself $105 million two years ago.Quite simply, analysts believe Visa stock is unstoppable. Because its bank payment network is used by so many third-party processors, innovations that fail outside it can succeed inside it. When Visa tells other processors to jump, they still drop what they're doing to ask, "How high?" Visa Stock Has Real RisksThe risks with Visa are those of the global economy.This means the risks are rising. The global economy is now growing at just 2.6% per year, and the World Bank says risks are firmly on the downside. China's growth has slumped to an annual rate of 6.2% and the trade war continues to bite.Even if electronic payments are taking an ever-bigger piece of that pie, processors like Visa remain under threat on pricing and costs. India's Unified Payments Interface offers lower costs in order to reduce the use of cash there. Chinese systems like Alipay from Alibaba Group Holding (NASDAQ:BABA) cost less, too. Nationalism is also increasing. India won't let processors take customer data outside the country.Visa is trying to get ahead of low-cost systems by joining Facebook's (NASDAQ:FB) Libra Association, but it still has enormous technology debt. Visa runs an incredibly costly network of charge agreements among banks, merchants and customers that has developed over decades and costs money to maintain. The Bottom Line on Visa StockVisa is the premier player in the global payments space, but does that make it a great investment at its current price?Square costs just 10 times revenue, and it's growing much faster. True, Square is only marginally profitable, while Visa is a profit-making machine, still growing at 10% per year. Visa looks safer.If you got into Visa as an income investor five years ago, when it was paying a dividend of nearly $2 per share on an investment of $63, your current yield is just 1.5%. It might be time to take some profits and invest them for a higher yield. Even younger investors might start looking for a good exit point. A profit is only paper until the cash is in your hand.Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O'Flynn and the Bear, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in BABA. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Dependable Dividend Stocks to Buy * 10 Stocks Driving the Market to All-Time Highs (And Why) * 7 Short Squeeze Stocks With Big Upside Potential The post At These Valuations, It's Time to Take Profits on Visa Stock appeared first on InvestorPlace.
Despite trade tensions between the U.S. and China and Altaba (NASDAQ:AABA) liquidating its stake in Alibaba (NYSE:BABA), Alibaba stock has done very well in 2019, rising 21% year-to-date. A big part of its success this year is BABA's plan to list its shares in Hong Kong.Source: Shutterstock According to Bloomberg, Alibaba has filed confidentially for a Hong Kong listing in what could be the territory's biggest listing sale since 2010. Although the final fundraising target isn't finalized, Alibaba could raise as much as $20 billion from the listing.Before it IPO'd in New York in 2014, Alibaba considered listing in Hong Kong but decided against it due to tougher ownership regulations in the territory. If Alibaba listed in New York, Jack Ma and cofounder Joseph Tsai could still retain control of the company despite not owning a majority percentage of Alibaba. In Hong Kong, Ma and Tsai would not be able to control Alibaba so effectively.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAlthough Hong Kong hasn't changed its ownership rules, Alibaba is now much more inclined to a Hong Kong listing. First, Jack Ma plans to retire and focus more on philanthropy. Second, the Chinese government seems to want more Chinese companies to list in China rather than in New York. * 10 Stocks Driving the Market to All-Time Highs (And Why) Naturally, many investors wonder how much upside a Hong Kong listing would mean for Alibaba's U.S. shares. A Listing That's Bullish, But Only Partly SoI believe Alibaba's U.S. listed stock will benefit from the listing, but only slightly. If Alibaba were to list in Hong Kong, I believe the stock would be valued at a higher multiple than its current valuation in New York. More people use Alibaba's services and websites in China and Hong Kong, and the added awareness will likely generate more buying from retail investors, which could give Alibaba a higher valuation. While that sounds like great news for U.S. owners of Alibaba, it's only partly bullish because the two exchanges are hard to arbitrage. In an ideal world, if Alibaba's stock in Hong Kong were priced higher than it was in New York, an astute investor could buy the New York stock and sell the Hong Kong stock, and hope for an eventual closing in a relatively risk-free manner. The problem is that a closing isn't guaranteed to happen in the real world. Although the Hong Kong dollar is pegged to the U.S. dollar, there isn't a Hong Kong New York stock exchange connect where an investor could easily buy the Hong Kong listed Alibaba stock and simultaneously sell the New York listed stock. Meaningful discounts between similar securities have also persisted for many years before. For a long time, South African conglomerate Naspers traded for a 30% discount to its Tencent (OTCMKTS:TCEHY) stake alone, despite Naspers owning things outside of Tencent. Are There Plenty More Reasons to Buy Alibaba Stock?There is a lot to like about BABA stock besides the fact that it will list in Hong Kong. Although it dominates e-commerce in China, BABA trades for just 19 times forward earnings estimates, which almost makes it a value stock considering its future earnings growth potential. Furthermore, Alibaba isn't just an e-commerce play. Due to various astute investments, Alibaba has exposure to China's mobile payments market with partial ownership of Alipay, exposure to China's cloud growth with Alibaba Cloud, and exposure to a variety of future markets due to its leadership in artificial intelligence. By being one of China's top two tech companies, Alibaba has the financial resources to buy or copy the business models of competitors that might disrupt it. It has the financial resources to invest in startups of promising sectors and participate in their growth as well. * 7 Stocks Being Inflated by Low Rates As for the potential long-term effect of the Hong Kong listing, the listing could improve Alibaba's fundamentals if management executes. If the company uses the money raised for productive purposes such as investing more in the cloud or artificial intelligence, Alibaba's margins and earnings-per-share could go higher and that'll benefit investors everywhere, not just in Hong Kong.As of this writing, Jay Yao did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Dependable Dividend Stocks to Buy * 10 Stocks Driving the Market to All-Time Highs (And Why) * 7 Short Squeeze Stocks With Big Upside Potential The post Will Alibaba Stock Soar Thanks to Its Hong Kong Listing? appeared first on InvestorPlace.
(Bloomberg Opinion) -- Since the U.K. decided more than three years ago to leave the European Union, the nation's savviest investors have succeeded by putting their money where Brexit matters least.Uncertainty about the date of Britain’s departure (now pushed back to Oct. 31) and the terms of the divorce has meant purging the U.K. from their holdings or limiting them to investments traditionally impervious to man-made and natural disasters. Over 38 months, British sterling depreciated 16 percent, the worst shrinkage for any similar period in 8 years. The pound remains the poorest performer in the actively-traded foreign exchange market and inferior to the No. 3 euro.Europe's strongest major economy in the 21st century became a shadow of its former self, reversing two decades preceding the June 23, 2016 referendum when the U.K. outperformed the European Union in growth and investment. London's stock and bond markets similarly languished as laggards to world benchmarks, after beating them consistently in the 20 years prior to the decision to leave the EU, according to data compiled by Bloomberg.“If I give myself some credit, I would say that we acted reasonably fast liquidating U.K. shares” in 2016, said Ben Rogoff, whose Polar Capital Technology Trust PLC has been the most consistent winner out of the 212 British global funds with at least 1 billion pounds this year and during the past three years. His team's 114 percent total return (income plus appreciation) was 22 percentage points better than the Dow Jones World Technology Index, mostly because 68% of the fund is invested in the U.S., two-thirds of that in California companies, according to data compiled by Bloomberg. “It's all about the Internet and where do you get exposed to the Internet? The U.S. and China,” Rogoff said last month during an interview at Bloomberg in London.While Rogoff reduced his holdings of three California tech powers during the past year — Cupertino-based Apple Inc., Menlo Park-based Facebook and Santa Clara-based Advanced Micro Devices — he acquired more shares in Hong Kong-based Tencent Holdings Ltd, Hangzhou-based Alibaba Group Holding Ltd, South Korea's Samsung Electronics Co. and Tokyo-based Yahoo Japan Corp., according to data compiled by Bloomberg.The 46-year-old graduate of St. Catherine's College, Oxford, became the lead manager of the trust in 2006, “and at that time,” he said, “the U.K. weighting might have been 5% to 10%, so if you had already been backing away to the door, it's a lot easier to escape than if you built a career around being an expert in U.K. equities.” Since the Brexit referendum, he said, “There's just been a complete buyers' strike of U.K. equities.”Proof of such disdain comes with the crisis this year at the LF Woodford Equity Income Fund, Britain's most-prized investment when it was launched by star money manager Neil Woodford in 2014. The celebrated stock picker became even more prominent with his contrarian bullish stance on Brexit. The fund plummeted 31% during the past two years by holding a combination of large and small U.K. companies and has frozen redemptions indefinitely.“It's symptomatic of a broader problem,” Bank of England Governor Mark Carney told reporters earlier this month. “Our sense is that the financial-stability risks are increasing.”One U.K. investor who’s successfully resisted the trend away from domestic stocks is Nick Train, who manages Finsbury Growth & Income Trust. It returned 61% the past three years — more than twice the FTSE All-Share Index benchmark — as the most consistent one- and three-year performer among the 129 U.K.-based funds investing mostly in domestic stocks or bonds, according to data compiled by Bloomberg. Unlike Woodford, who doubled down on the British economy writ large, Train, a 60-year-old graduate of Queen’s College, Oxford, dramatically increased his holdings in consumer staples. These are the companies that make such essentials as food, beverages and household goods and can resist business cycles because their products always are in demand.Train, who declined to be interviewed, increased the consumer staples weighting relative to the benchmark to 27% from 23% in 2015 and he enhanced his holdings of Deerfield, Illinois-based Mondelez International Inc., which manufactures and markets packaged food products, and London-based Diageo PLC, the world's largest producer of spirits and beer, according to data compiled by Bloomberg.That's likely to be a safe bet as no one is counting on the British economy rebounding significantly from near the bottom of the EU while the uncertainty created by Brexit persists. “If you take a long view, then this may well be a great time to be investing in U.K. equity,” said Rogoff. “Thankfully, I don't have to make that binary call because there are very few U.K. companies I'm frankly interested in.”\--With assistance from Shin Pei, Richard Dunsford-White, Kateryna Hrynchak and Suzy Waite.To contact the author of this story: Matthew A. Winkler at email@example.comTo contact the editor responsible for this story: Jonathan Landman at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Matthew A. Winkler is a Bloomberg Opinion columnist. He is the editor-in-chief emeritus of Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.