In the span of about a year, Alibaba (BABA) went from a massive, yet relatively unknown e-Commerce company (located in China), to being the largest IPO in U.S. history. On its first day alone Alibaba’s stock surged an incredible 38%, while simultaneously shattering records once held by companies like Facebook (FB) and Visa (V). Even more significant, Alibaba is now touted as the largest competitor to long-standing Wall Street darlings Wal-Mart (WMT) and Amazon (AMZN).
However, some investors worry that Alibaba’s sudden rise is attributed to nothing more than speculation and hype. Some even believe that the e-Commerce giant is not a viable long-term investment because of its “limited” customer reach. The company’s stock price has been stagnant over the last two weeks as a result of this sentiment. So then, which position best describes Alibaba’s current existence and future state? Will Alibaba build upon its successful start and pose a very real threat to companies like Wal-Mart and Amazon, or is the e-Commerce giant destined for failure? To start, let’s focus solely on statistics.
One of Alibaba’s most impressive feats is that it controls 80% of the Chinese e-Commerce market. When you account for the fact that roughly 50% of the Chinese population has Internet access (or 614 million people), this is an astonishing accomplishment in itself; the global reach of Wal-Mart and Amazon pale in comparison. Even scarier, Alibaba continues to rapidly grow. After its U.S. IPO, more American consumers are analyzing Alibaba than ever before (other big name IPOs can be found here and here). As a direct result, I expect Alibaba to continue increasing its e-Commerce influence until it develops a substantial global footprint.
In addition, the company’s retail website sold nearly $250 billion worth of goods in 2013, more than Amazon and eBay combined. Moreover, Alibaba commands a market capitalization of $216.11 billion, much higher than Amazon’s $146.46 billion market cap, and nearly as large as Wal-Mart’s $249.1 billion market cap. In fact, Alibaba is worth more than Amazon and eBay combined. Although some traders might find such a valuation worrisome, for a company as young as Alibaba, the fact that it is already among these perennial powerhouses is a good sign. Not to mention the company’s earnings grew an astounding 196.14% and its revenue grew 56.06% (Y/Y). Unlike Alibaba, Amazon’s earnings declined 126.03% and Wal-Mart’s declined 2.79%.
Regardless, we must remain grounded and realize that these numbers have been inflated by Alibaba’s overwhelming international rise; yet that does not mean they are any less important. Yes, there is a ton of hype surrounding Alibaba, and its blockbuster IPO, but this excitement is warranted. What really matters is that the company has solid fundamentals and already exceeds the market cap of Amazon. Furthermore, investors should take advantage of Wall Street’s current hesitation and buy shares of Alibaba with a long-term focus in mind (do your due diligence before investing). Once Alibaba begins its momentous run, investors can be confident that Alibaba will trend upwards.
Regardless, we must remain grounded and realize that these numbers have been inflated by Alibaba’s overwhelming international rise; yet that does not mean they are any less important. Yes, there is a ton of hype surrounding Alibaba, and its blockbuster IPO, but this excitement is warranted. What really matters is that the company has solid fundamentals and already exceeds the market cap of Amazon. Furthermore, investors should take advantage of Wall Street’s current hesitation and buy shares of Alibaba with a long-term focus in mind (do your due diligence before investing). Once Alibaba begins its momentous run, investors can be confident that Alibaba will trend upwards.