Alibaba Stock: Is It a Good Buy?
Since its founding in 1999, Alibaba has grown exponentially. What began in China as an effort to give small businesses everywhere an advantage by connecting them to manufacturers that could provide competitive pricing has become an expansive network of digital products and services.
Alibaba has made history a few times. In 2014, it delivered the world’s biggest initial public offering. Earlier in 2021, it faced a record-making $2.8 billion antitrust fine from the Chinese government for business practices that were deemed to be monopolistic. Regulatory officials in Beijing have scrutinized technology companies as of late, asserting that they’re placing a higher value on profits than on being socially responsible.
What Is Alibaba?
Alibaba is a Chinese company focused on e-commerce, retail and technology. Its initial product, Alibaba.com, allows Chinese manufacturers to export their goods to businesses in bulk at a deeply discounted rate, all over the globe.
Apart from its flagship product, Alibaba Group Holding Ltd. — Alibaba’s parent company — owns or has a stake in:
- South China Morning Post
- China’s biggest shopping website, Tmall
- China’s second-biggest shopping website, Taobao.com
- A PayPal competitor called Alipay
- Sina Weibo, which is China’s version of Twitter
- Youku Tudou, essentially the closest thing China has to YouTube
- Online marketing services
- Cloud computing
How Does It Work?
In Alibaba, companies around the world have a centralized resource for many, if not all, of the functions needed to run their businesses. Although Alibaba’s initial offering was to unite sellers and manufacturers, it has expanded to include marketing, logistics, cloud support and other services. Ming Zeng, Alibaba’s former chief strategy officer, described it this way in a Harvard Business Review article: “Alibaba does what Amazon, eBay, PayPal, Google, FedEx, wholesalers and a good portion of manufacturers do in the United States, with a healthy helping of financial services for garnish.”
Anyone from around the world can contact a professional on Alibaba and receive a quote for an array of products and services. From there, the buyer and seller negotiate toward an agreed-upon price. Alibaba is the engine behind many of the everyday purchases made in the U.S. and other countries. For example, if you buy a notepad for $9.99, it’s possible that the person or company that made it was able to do so at a reasonable profit because of an advantageous price obtained on Alibaba.com.
How Does Alibaba Make Money?
The majority of Alibaba’s revenue comes from online advertising on its various websites. With a self-reported 1 billion annual active users, including 891 million consumers across its various retail platforms in China, Alibaba has the benefit of a huge audience to advertise to.
The company also makes commissions on sales, fulfillment and online payments.
How Much Does Alibaba Earn?
Alibaba’s fiscal year ends on March 31. For the 2021 fiscal year ending March 31, 2021, the company reported earnings of $22.94 billion. Non-GAAP net income rose by 30% on a year-over-year basis.
How Much Is Alibaba Worth?
Alibaba has been a publicly traded company since its initial public offering in September 2014. The company currently has a market capitalization of approximately $387.84 billion.
Is Alibaba a Buy?
As of Nov. 24, research firm Zacks rates BABA stock as a 5, or “strong sell.” However, CNN Business reports that of 52 polled investment analysts, 41 rated the stock a “buy,” six gave it a rating of “outperform,” four rated it a “hold” and one rated it a “sell.”
Good To Know
Alibaba made quite a splash as the “Amazon of China” when it went public, but it’s run into some significant headwinds over the past few years. The Chinese government has cracked down on large corporations in China, particularly in terms of privacy and data collection concerns, and Alibaba has faced rising competition in its own markets. However, even though its most recent earnings report disappointed investors, the company still posted year-over-year sales gains of 29% and projected current-year growth of 20% to 23%.
How To Buy Alibaba Stock
You can purchase BABA stock via an individually held brokerage account or individual retirement account. You can purchase entire shares or, at some financial institutions, you may be able to buy fractional shares.
A Disruptor That Aims for More
For more than two decades, Alibaba has dramatically expanded the number and types of opportunities that are available to small businesses. As a result, it has fueled greater competition across the globe and enabled many who wouldn’t have otherwise been able to do so to step into entrepreneurship. Although the company has faced its own growing pains — and may not be out of the woods with its recent earnings miss and the crackdown of Chinese regulators — few can question the impact that Alibaba has had or the potential it carries to keep innovating. Investors may have to be tolerant as the company works through its current issues, but believers in the continued growth of online commerce in China and beyond might still want to keep an eye on Alibaba.
John Csiszar contributed to the reporting for this article.
Data is accurate as of Nov. 20, 2021, unless otherwise noted, and subject to change.
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