In Q4 2020 revenue for Alibaba was 221 billion Chinese Yuan (CNY) or about 33 billion USD, which was up 37% year over year. Net income was 77 billion CNY or about 12 billion USD, up 27% year on year. Basically Alibaba is killing it and despite their massive size, they continue to grow really fast. Let's not forget, besides Ecommerce, the company also has major businesses in cloud computing (just like Amazon
So how does it make sense for such a fast growing Ecommerce company to have a PE ratio of just 30?!? For reference, Amazon has a PE ratio of 79! Now of course Amazon's price might be a bit rich thanks to Jerome Powell and his big money printer, but should Amazon really have a PE that's almost triple that of Alibaba?
China's macroeconomy is growing much faster than America's, China's middle class (350 million plus) exceeds that of America's entire population. Also Alibaba's cloud revenue is soaring. It grew by 50% year over year in the last quarter to 16 billion CNY, about 2.4 billion USD and it just made positive EBITA for the first time. For comparison, Amazon's cloud business in Q4 grew its revenue by 28%. Of course Amazon is a great company: but there is a lot of risk there too, US interest rates are at record lows and lots of Pols down in Washington DC are talking antitrust.
Now of course everyone is freaking out because the Chinese Government delayed Ant Financial's IPO (Alibaba owns 33% of Ant) and the government is also investigating Alibaba for monopolistic practices. But seriously everyone needs to look through this, Ant will probably IPO in the future, and the anti-monopoly isn't really much to worry about either, apparently Alibaba was pressuring some of their merchants to not sell on competing platforms like
Worth noting is Alibaba just sold five billion dollars of bonds yielding between 2.1% and 3.2%. These bonds are due between 20 and 40 years in the future, so if Investors really thought Alibaba was gonna go under, why would they accept such a low yield on such long term debt?
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