BUZ INVESTORS Alibaba Stock Jumped Shares of Alibaba Group Holding Ltd (NYSE:(BABA) catapulted 14% after the company released jaw-dropping guidance on Wednesday, June 7. CFO Maggie Wu was the face of the announcement, which took place at Alibaba’s investor conference in Hangzhou, China.
Once you see the numbers, you’ll understand why investors were so enthusiastic.
Alibaba said it expects between 45% and 49% sales growth in 2018. This was nine to 13% above analysts’ estimates, which shows that Alibaba executives have high hopes for the coming year. (Source: “Financial Perspective and Guidance,” Alibaba Group Holding Ltd, June 8, 2017.)
No wonder BABA stock went nuts.
Alibaba is the Chinese equivalent of Amazon.com, Inc. (NASDAQ:(AMZN), a growth monster if ever I saw one. Amazon continues to push into new markets and dominate them, but China has remained beyond its grasp.
Why was the market so wrong about BABA stock? One explanation is that investors still view Alibaba as an e-commerce company, when in fact it is so much more.
I don’t care how sophisticated the model is, there is no way you can come up with a concrete target for this kind of company. All you can do is figure out whether or not the price will go up.
From that perspective, BABA stock is a no-brainer. The share price is almost guaranteed to rise dramatically over the next few years, in part because China’s median wealth is skyrocketing.
The country has twice as many online users as the United States, which translates to twice as many shoppers, twice as many founders, twice as many everything.
A skilled hand is needed to make the right investments, one with pure mastery of business models and macros. Regular CEOs, clever though they might be, would do better to funnel their profits back to shareholders. Dividends and share buybacks will do just fine for them.
But top-tier founder/CEOs should expand through investment. It yields enormous returns when properly executed. For instance, AMZN stock more than doubled in the last two years despite being classified as a “mega-cap stock.”
|Industry:||Retail – Apparel & Specialty » Specialty Retail NAICS: 454113 SIC: 5961|
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|Traded in other countries:||AHLA.Germany, BABA N.Mexico, BABA.Switzerland,|
|Headquarter Location:||Hong Kong|
Alibaba Group Holding Ltd is an online and mobile commerce company. It operates China’s most popular online marketplaces such as Taobao (C2C), Tmall (B2C), and Juhuasuan. It also engages in advertising, digital media, cloud computing, and other.
Alibaba is the world’s largest online and mobile commerce company, measured by GMV. It operates China’s most popular online marketplaces, including Taobao (C2C), Tmall (B2C), and Juhuasuan (group buying). Alibaba’s China marketplaces accounted for 76% of revenue in fiscal 2017, with Taobao revenue generated through advertising and Tmall revenue coming from commissions, followed by digital media (9%), international marketplaces (8%), cloud computing (4%), and other (2%). Mobile GMV accounted for 79% of consolidated GMV in fiscal 2017.
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