Alibaba (NYSE: BABA) has long been seen as a flagship of China’s financial landscape, with its fingers in various pies spanning e-commerce, cloud services, and more. Over the past vibrant decade, Alibaba exhibited exponential growth, mesmerizing investors with its upward trajectory. However, its recent stock performance paints a different picture, plummeting by a whopping 63% to around $113, an ominous echo of past glories.
Image source: Getty Images.
Despite facing a trifecta of challenges – macroeconomic uncertainties, fierce competition, and stringent regulations, the Alibaba ship seems set to right itself and sail towards calmer waters, all thanks to its diligent crew of reforms and adaptability.
Overcoming Obstacles
In 2021, Alibaba was bruised by hefty fines and stringent regulations that tilted the scales in favor of competitors like PDD and JD.com. The macro scenario, compounded by COVID-19 disruptions, added more weight to its burdens. Yet, Alibaba weathered this storm, and recent governmental stimuli offer a glimmer of hope, hinting at smoother sailing ahead.
Alibaba’s growth trajectory wavered in the face of adversity, but fiscal 2024 showed a promising rebound, with revenue and net income bouncing back. International arms of the conglomerate shone bright, offsetting muted growth in its Chinese bastions like Taobao and Tmall.
Growth Rebound
Alibaba’s revenue and net income chart a rollercoaster ride, decelerating in recent years before picking up pace in fiscal 2024. Overseas markets, including Lazada and AliExpress, emerged as pillars of strength, compensating for domestic doldrums.
|
Metric |
FY 2021 |
FY 2022 |
FY 2023 |
FY 2024 |
|---|---|---|---|---|
|
Revenue growth |
41% |
19% |
2% |
8% |
|
Adjusted net income growth |
30% |
(21%) |
4% |
11% |
Data source: Alibaba. FY = fiscal year.
Analysts predict a modest yet stable growth trajectory for Alibaba over the next few years, pegging its revenue and net income to grow at a steady clip. While it might not reclaim its former glory overnight, Alibaba’s dominance in the Chinese markets suggests a resilient path ahead.
Cash Generation Continues
Alibaba, in a bid to reassure investors, embarked on a share buyback spree in fiscal 2024, coupled with dividends and special payouts, reflecting its commitment to shareholders amidst turbulent times. The stock’s attractive valuation further sweetens the deal, offering an enticing proposition for stakeholders eyeing long-term gains.
Undervalued Gem
At 15 times next year’s projected earnings, Alibaba strikes a bargain indeed for savvy investors eyeing a potential turnaround story. As China charts a course towards recovery, Alibaba stands poised to ride the wave, propelled by its robust e-commerce and cloud arms. The rough seas seem to be calming, paving the way for Alibaba to set sail towards sunnier horizons.
