ALIBABA

Analysis of Alibaba share price

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Latest news

The Chinese government signs an agreement with Ant Group

03/02/2021 - 10h45

Ant Group, a subsidiary of Alibaba, will ultimately be reorganised as a financial holding company, in accordance with an agreement reached with the Chinese government, which had cancelled its IPO and requested this restructuring.

Elements that can influence the price of this asset:

Analysis N°1

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.

Analysis N°2

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.

Analysis N°3

As we have just seen above, we also recommend you take into account China’s economic stability before taking a position.

Analysis N°4

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.

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General presentation of Alibaba

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.

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.

Analysis of Alibaba share price
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The major competitors of Alibaba

We now propose to discover who are Alibaba's main competitors in its main sector of activity, namely online sales, with a presentation of the largest companies in this sector around the world.

Amazon

Of course, Alibaba's first and most important competitor is the American giant Amazon. This American online retailer is based in Seattle and has been one of the giants of the web for many years. Its activities have developed strongly over the years and the group now offers online sales of all kinds of products. In 1997, three years after its creation, Amazon was listed on the Nasdaq stock exchange. Today, the company employs more than one million people worldwide and its website is one of the most visited websites in the world. It is accessible and adapted in many countries.

JD.com

Another competitor to Alibaba is the Chinese group JD.com, which is also a company specialising in online commerce and was founded by Liu Qiangdong. Formerly specialising in the sale of electronic devices, this company now distributes consumer products. The JD.com platform is also the second largest e-commerce platform in terms of number of customers in China. JD currently has no less than 292.5 million active customers. Its operation is very similar to that of Amazon, since it sells goods directly to its customers that it owns because it has purchased them in advance, which has forced the company to set up a network of warehouses and invest a lot of money in logistics.

Walmart

Another competitor of Alibaba is the transnational American group Walmart, which specialises in mass retailing. Walmart has been operating in China since 1996 and now employs tens of thousands of workers and owns over 419 shops. But the group is also present in other countries with more than 27 countries and owns approximately 71 subsidiaries. It is the largest private sector employer in the United States.

Macy's

Still in the retail sector, the Macy's Group is an American retail chain based in New York and is known for sponsoring a Thanksgiving Day parade in the street of that city. Macy's has also owned Bloomingdale's shops since 1994.

Apple

Finally, we should also consider Apple, an American multinational company that creates and markets consumer electronics. It is also known that this group currently employs more than 137,000 people and runs more than 506 Apple Stores in 25 different countries. It also operates an online store where it sells both its own products and products from other companies.


The major partners of Alibaba

AXA & Ant Financial

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.

Nestlé

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.

Crédit Agricole

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.

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The factors in favour of a rise in the Alibaba share price:

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!

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.

The factors in favour of a drop in the Alibaba share price:

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.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions.

Frequently Asked Questions

On which markets are the Alibaba shares quoted?

The Alibaba Group shares are quoted on the New York stock exchange where they made their initial appearance 19 September 2014.  The share price was quoted for the first time at this moment at 68 dollars. It was also the largest IPO on the stock markets worldwide with a total amount of 25 billion dollars. In November 2019 Alibaba shares also made their entry onto the Asian stock markets in Hong Kong. This quotation on two financial marketplaces was made possible due to changes in the regulations in 2018.

What are the turnover sources of the Alibaba Group?

The turnover figures for the Alibaba Group are derived from different segments and different activity sectors. In fact, for the year 2018, over 85.5% of the group’s turnover was generated by the sale of online commercial services through a platform bearing the same name as the company. We also note that 5.4% of this turnover was from the sale of IT services. The remaining 9.1% of the turnover was derived from various associated activities.

What are the financial ratios for the Alibaba Group?

For the 2018 fiscal year the financial information of the Alibaba Group was published in the following manner:

  • The ratio of net revenue in real capital was 13.98 Euros
  • The ratio for the net revenue according to the turnover was 24.54 Euros
  • The workforce ratio was 66.42%
Of course, this is the financial data published by the company last year. The new data will be published in March 2020 for the 2019 fiscal year.

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