After reporting quarterly earnings last Friday, shares in Alibaba Group Holding Ltd (NASD: BABA) are up 35% since January, and at UGC we believe this internet giant is only just getting started.
BABA is an online and mobile commerce company operating in China and internationally. Founded by former English teacher Jack Ma, this company is among the world’s 10 most valuable companies with a market cap of US$311 billion.
The e-commerce giant operates a range of online platform businesses including Taobao Marketplace, an online shopping destination; Tmall, a third-party platform for brands and retailers and Alibaba.com, an online wholesale marketplace. It also developed Alipay, a third – party online payment platform, which has become the dominant player in the local online payment market. According to Zacks, Alipay accounts for approximately half of all online payment transactions within China.
BABA is seeing particularly strong growth in its Core Commerce division while at the same time converting a huge amount of this growth into profits as evidenced by its 62% EBITA margin for the fiscal year ended 31 March 2017. Alibaba has also seen strong growth for its Cloud Computing services, having grown its paying customer base from 513,000 to 874,000 in the past 12 months. This has resulted in revenue growth of 103% year-over-year for this division. Revenue was up by 56% from US$14,694 million in March 2016 to US$22,994 million.
We first recommended BABA in August last year on a breakout of the 18 month basing pattern when it was trading around US$90. After a short term hiccup around the Trump election win, when growth stocks globally were sold off, BABA’s share price has re-established its uptrend and we continue to recommend clients hold the stock today.
Supported by the continued rise of the Chinese middle class, and the highly profitable business model, we believe Alibaba is well placed to continue to expand its growth at a rapid pace over the course of the next few years.
If you want to know which stock we’re buying today that have huge upside potential, contact United Global Capital today for a no cost, no obligation consultation on 03 8657 7640 or email email@example.com to learn about our Quality, Value, Trend (QVT) investment selection methodology.
The information contained in this article is General in nature and has been prepared without taking into account your objectives, financial situation and needs. When assessing any investment you should also consider that past performance is not a reliable indicator of future performance.
Jeanne is a Financial Analyst at UGC
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