Alibaba stock price: Highly attractive but uncertain

zwinvestandretire@newsletter.paragraph.com (zwinvestandretire) — Sun, 19 Dec 2021 11:44:13 GMT

Alibaba stock price had declined more than 50% over the past year (Yahoo Finance), due to continuous policies implemented by the Chinese government to prevent monopolistic practices by big companies in China. Alibaba company was one of the first few companies that suffered from this crackdown, followed by other sectors such as education and real estate companies.

Recent earnings clearly did not satisfy investors

Despite missing analysts' forecast of revenue, Alibaba still managed to obtain an outstanding year-on-year increase of more than 20% in revenue. The strong e-commerce and cloud businesses have a strong foundation in securing revenues in the case of stringent regulations.

Additionally, there are a few innovations that Alibaba is currently undertaking to boost the company's potential profits. In the case of e-commerce business, Alibaba aims to diversify its target users, as seen from targeting the lower-tier cities in their China retail marketplaces and New Retail businesses.

On the other spectrum, Alibaba is leveraging on latest technologies such as blockchain technology to sell 'digital collectibles' in the marketplaces. During Singles' day 2021, Alibaba released the "Metaverse Art Exhibition", where users can view non-fungible tokens (NFTs) from brands such as Burberry.

Conclusion: It is a (really) long term commitment

As a shareholder of Alibaba myself, I am deeply convicted in its fundamentals of the company, from the large scale of e-commerce business in China, together with the continued expansion of its efficient logistics services (Cainiao Network).

Using Discounted Cash Flow (DCF) analysis, I have derived the current intrinsic value to be approximately priced at $278, which accounts for more than 50% of the margin of safety. I have concluded this position to be a long-term holding.