BABA - Alibaba: On The Verge Of A Downfall

2024-05-06 17:16:36 ET

Summary

• Alibaba's stock has performed poorly, with a -58% ROI in the last 5 years, due to the CCP crackdown and structural economic problems in China.
• The grip of the CCP on Chinese companies, the risk of delisting in the US, and the VIE listing structure pose additional risks for investors.
• Alibaba's marketplace dominance is fading. Restructuring isn't yielding benefits, and it's facing declining FCF, poor cloud-unit growth, and talent is leaving the company.
• With fundamental challenges and an uncertain regulatory path forward, the stock is trading at a cheap valuation, but that does not justify buying it.
• I rate Alibaba as a "Sell" as a result of the structural problems, the uncertain future, and limited growth potential.

Once praised as a darling of Wall Street and taunted by investment analysts as one of the best stocks for exposure to the Chinese stock market, Alibaba Group ( BABA ) has greatly disappointed investors with its stock being crushed with a return of -58% return in the last five years, despite e-commerce and cloud businesses performing well lately, on the opposite side of the Pacific Ocean.

A combination of the CCP's crackdown on Chinese technology companies resulting in a hefty fine of $2.8 billion back in 2021 alongside structural economic problems in the country, Alibaba's once formidable dominance is fading....

For further details see: