It is often called Alibaba (NYSE: BABA) is the north of China Amazon. But with a market cap of $ 394bn, it’s only about one-fifth the size of its American rival. At 14 145 today, Alibaba shares are up 47% from this time last year. And it dropped 6% last week alone. When a growth stock falls this massively, investors are probably selling more than buying. And there is usually a good reason.
However, fewer entry points may represent a buying opportunity. And while the stock has seen good days, it has risen 37% in the last five years. So why is it falling recently?
Chinese repression campaign
Alibaba was fined .8 2.8 billion by Chinese authorities earlier this year for its anti-competitive practices. And Beijing has continued to pay small fines for regulatory violations over the past few months. This makes me anxious for the continued growth of the company.
And then Jack’s mother, the controversial co-founder of Alibaba. In October 2020, he commented that the Chinese banking system was a “Elderly Club,” And China must be abandoned “Bank mortgage mentality.” He was then missing for several months. Beijing has postponed a b 2 billion IPO of Ma’as Ant Group, citing risks to China’s financial system.
Alibaba owns one-third of Ant Group, which owns Alipay, China’s largest digital payment platform. The mother’s vision was to remove power from traditional traditional institutions, but regulatory intervention prevented it from happening. This is a major concern for the stock. It is unknown at this time what he will do after leaving the post.
Then there is China “General Prosperity” Wealth redistribution agenda. The company has already contributed 15.5 billion by 2025, which will be a huge loss in terms of profits. And there is no guarantee that this ‘contribution’ will not increase.
Alibaba share price compared to Amazon
For obvious reasons, it is tempting to compare Alibaba share prices with Amazon. In their respective regions, they are market leaders in both e-commerce and cloud services.
Alibaba’s revenue grew 64% year-over-year in fiscal year 2021. Meanwhile, Amazon has grown revenue by about 30% year-over-year over the past three years. And CEO Daniel Zhang says there is Alibaba “Achieve historic milestone of one billion annual active consumers worldwide,” At the moment the Chinese giant may look like a bargain compared to Amazon.
But the earnings from their value (P / E) ratio tells a different story. Alibaba is only 17, compared to Amazon’s 59. Perhaps investors who choose between the two companies consider Chinese regulatory pressure too much. Meanwhile, Amazon is benefiting from a more friendly political environment.
And China’s second-largest property developer, Evergrand, has failed to pay interest on just $ 83 million. There is a possibility that the second-order transition from the possible collapse of Evergrand could spread to the wider Chinese economy. In that case, foreign investors will probably take some of their assets out of China. Alibaba will almost certainly be affected.
All of this demonstrates the basics of an uncomfortable market. Feelings are important, and are extremely difficult to measure. Alibaba share price could be an opportunity. And I’m not bothered by the high-risk play sometimes. But on this occasion, it’s just not worth it for me.
Is this little known company the next ‘Monster’ IPO?
At the moment, this ‘Bought by shouting’ The stock is trading at a steep discount from its IPO price, but looks set to skyrocket in the coming years.
Because this North American company is the clear leader in his case which is assumed Valued at 1 261 billion by 2025.
The Motley Flower UK team of analysts has just released a comprehensive report that shows you why we believe it has so much potential.
But I warn you, You need to act fast, Given how fast this ‘Monster IPO’ is going.
John McKee, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the board of motley flowers. Charles Archer owns shares in Amazon. Motley Flower UK owns and recommends shares of Alibaba Group Holdings Limited and Amazon. Motley Flower UK recommends the following options: long January 2022 $ 1,920 calls to Amazon and 2022 short কল 1,940 calls to Amazon. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.