The company Alibaba Holding, is currently the leader of online sales in China. Thanks to an online platform that allows professionals and individuals to trade online, generating an increasingly important turnover.
Its activities mainly concern 3 major sectors, the operation of its online platform, as well as online payment services and other digital functionalities.
Alibaba’s main competitors:
Alibaba is currently one of the giants of the web which have been able to build itself a reputation in the sector of international e-commerce. But it is not the only one to exercise in this sector and must therefore face certain threats from its competitors. In your fundamental analysis of this title, you should also take into account Alibaba’s main competitors and their results. To help you, here is the list of the company’s main competitors listed by turnover:
- Amazon with 135 billion dollars
- JD.com with 26 billion dollars
- Apple Inc with 24 billion dollars
- Wal-mart with 13 billion dollars
- Suning Commerce Group Co with 8 billion dollars
- Otto with 7 billion dollars
- Tesco PLC with 6 billion dollars
- Vipshop Holdings Limited also with 6 billion dollars
- Liberty Interactive Corporation with 5 billion dollars
- Macy’s with 4.5 billion dollars
Alibaba’s main partners:
In 2016, the group AXA, Alibaba and Ant Financial Services signed an agreement of global strategic alliance with the aim of exploring together the opportunities of distribution of its products and insurance services of the French group through Alibaba’s e-commerce platform, and more specifically for businesses and customers that were already buying and selling online through Alibaba’s platform.
The same year, it was the group Nestle that stablished a partnership with Alibaba in order to introduce its products in the Chinese market which was very closed until then. Hundreds of Nestle products have been sold on the Alibaba platforms.
Always in 2016, Credit Agricole also became a partner of Alibaba to offer car insurances to customers who have purchased a vehicle on Alibaba’s platform through its subsidiary GMC-Sofinco.
Analysis of Alibaba’s share price:
Alibaba shares are listed live on the American stock exchange NYSE and on the Main Market.
Alibaba shares were listed for the first time on September 2014. It first had a slight decline in price, which was immediately followed by an upward trajectory that lasted until December 2014. In the beginning of 2015, the company started losing some points, but it seems to be going up again.
Important stock market data about Alibaba:
To finish this article, here are some general but essential information that you should know about Alibaba:
- In 2017, Alibaba reached a total market capitalization of 301 292.85 MUSD
- The number of titles issued by Alibaba for the same period and currently in circulation on the market is about 7,508,642.
- The price of Alibaba’s shares is currently listed on the NYSE’s Main market in New York United States.
- Alibaba is also part of the American stock market index DJ100 and is therefore one of the 100 American companies of the sector with the largest market capitalization.
- Alibaba’s shareholding is made up of 32% of shares owned by the investment fund SoftBank Corporation, 15.40% of shares held by Yahoo and 12.50% of shares held by the directors of the group as well as by its current director. The rest of its shares are in free circulation on the market and are traded between individual investors and institutional shareholder investor.
Alibaba’s economic and financial history:
In order to help you analyze better Alibabas historical course, here is a recall of the most recent economic and financial events that have marked this company:
- In 2013, Alibaba bought 2% of the capital of Haier with an investment of 364 million dollars
- In 2014, Alibaba bought AutoNavi in China for 1.58 billion dollars and also bought 60% of ChinaVision a company specialized in the production of films. That same year, the company invested in the American start up Tango. It also acquired 800 million euros of shares in the Youku Tudou company and 34% of the shares left from UCweb.
- In 2014, Alibaba shares were listed for the first time on the stock market in New York for $68. This introduction will be the most important ever made with $25 billion dollars.
- In 2015, Alibaba invested in Meizu and became one of its major shareholders. It then announced that he was going to buy the remaining shares from Youku. That same year, it also bought South China Morning Post for 266 million dollars and signed a contract with Disney for the provision of video on demand in China.
- In 2016, Alibaba acquired a majority stake in Lazada and established a partnership with AXA insurances. The same year, it announced the purchase of 25% of the Sanjiang Shopping Club for 300 million dollars as well as an additional 7% shares in the same company.
- In 2017, Alibaba increased its stake in the Intime Retail company going from 35 to 74% and bought MoneyGram for 880 million dollars.
- Finally, in 2017, Alibaba invested 18 million euros in the Swiss start up WayRay specializing in augmented reality in cars. The group also ended the videos on demand collaboration with DisneyLife, a collaboration that only lasted 5 months.
The strengths and advantages of Alibaba shares as a stock market asset:
To start investing on a Chinese asset such as Alibaba, it is necessary to know good the advantages and the strengths of this stock market title and its possibilities to evolve positively in the years to come. Here is therefore a summary of the advantages of this group.
The first advantage of Alibaba is of course the scale of its operations as well as the market in which the group operates which is mainly the Chinese market which is one of the most sought after in the world. China is in fact the most populated country in the world but also a country in full economic development and is therefore an important economic leader. However, it is particularly difficult even for large international companies to enter into this very profitable market. But Alibaba has accomplished this very quickly which suggests an interesting growth in the years to come with guaranteed revenues.
Another advantage of Alibaba concerns this time the company’s shares on the market. Just as we mentioned above, Alibaba is a key player in the Chinese market, where it held nearly 58% of shares on the market in 2017. Its closest competitor only holds 22% of shares on the market. To accomplish this, Alibaba has taken advantage of the strong support from large-scale producers that enables it to supply its products in the Chinese market as well as to the rest of the world.
Alibaba is also a visionary leader. In fact, the group is directed since a long time by Jack Ma who has an evident knowledge and avant garde vision of the market. The same way that Steve Job was behind the success of Apple, Jack Ma is known for being at the origin of Alibaba’s success and growth. It is obvious that the company has big chances to benefit, in the future, from the advice and vision of this iconic leader and therefore benefit from optimal management.
Finally, one of the main advantages of Alibaba is the good relationships that the group has with its different partners. And those partners are numerous since the company offers such a good environment. Alibaba offers merchants and consumers as well as third party merchants, financial systems, scalable platforms and efficient storage and cloud solutions, which makes this company particularly attractive.
Alibaba’s weaknesses and disadvantages as a stock market asset:
We have just discussed about Alibabas advantages and how this company could be attractive for investors, who want to invest on this title especially through CFDs. But before embarking on such speculation, it is necessary of course to take a look at the weaknesses or main disadvantages of this group. Here is therefore a summary of Alibaba’s weaknesses.
The first weakness of Alibaba’s business model is strangely its success. In fact, this platform does not limit the number of sellers that can subscribe to the platform to commercialize their products. That could lead to a significant increase in the number of sellers every year but also to an increase in the level of competition between those sellers. Even if at the end customers benefit of course from this strong competition to make good deals, the sellers could, eventually, no longer bear the excessive competition that weights on its profitability. The latter could therefore finally end their contract with Alibaba which will pose of course some problems to the company. Let’s recall, that some years ago, there were around 8.5 million sellers on this platform, but this figure has continued increasing. This is the reason why many of the most popular sellers have quickly pulled out from selling their products online on Alibaba’s platforms Taobao and Tmall.
Another negative point about this company concerns the very high level of discount. In fact, Alibaba’s pricing policy does not allow sellers to sell their products at fair and profitable prices. It is mainly through the rental of advertising spaces that this group generates most of its revenues. However, the sellers who are forced to sell their products at low cost could also decide to leave the ship for a more cost-effective solution.
Finally, you should of course take into account the very particular trade policy in China and the limits sometimes imposed on companies which could hinder or impede their development. Alibaba could therefore not beneficiate from the same freedom than its main competitors and thus lose important shares on the market.
Despite a few disadvantages, Alibaba remains a financially solid company which does not really has any immediate risk in the future.
How to carry out a good fundamental analysis of Alibaba’s share price:
Now that you know the advantages and disadvantages of Alibaba’s shares, you should be able to understand how this company could evolve in the long term and thus carry out some effective strategies. But to put in place wise strategies for this share with CFDs, you should especially be able to take into account the challenges of the company. Here are therefore the opportunities that the company should seize and the challenges it faces, which will help you carry out your fundamental analysis.
The first challenge to take into account about the future of this company is of course, its ability to expand to other markets other than the Chinese market. In fact, if the group has been able to gain a certain notoriety in its own country of origin, it counts with the necessary assets to conquer the world markets.
In order to achieve this goal of developing internationally, Alibaba will first of all have to seduce the different international economic models. There is currently an increase of demand for e commerce portals and few of them counts with the reputation that Alibaba has. For each country in which Alibaba will try to impose, the group will first have to gain the trust of professional sellers as well as that of buyers and this normally takes some years. That could of course, also lead to significant competition from local players that could become more aggressive. However, Alibaba counts with an economic model based on aggregators, which enables it to significantly reduce costs and maintain lighter operations. This system also enables the group to reproduce its model easily on other markets.
Of course, Alibaba also has to deal with some challenges such as the significant development of some of its competitors. In the Indian market for example, which is targeted as a priority by Alibaba, where this platform already has two very serious competitors Amazon and Flipkart who already have a solid reputation in the country. Alibaba will probably need some time to reach the level of these two entities which have been historically established in this country. In a more global way, Alibaba’s competition has become increasingly stronger in recent years particularly in the international scale where several major groups such as eBay, Amazon, JD,and Tencent represent a serious challenge.
As we have just seen above, we also recommend you take into account China’s economic stability before taking a position.
Finally, the increasing demand for e-commerce platforms has led to a significant decline in profitability for companies such as Alibaba, which could lead to a loss of interest by investors for this security.