This Could Be Huge for BABA Stock
Investors often find investing in foreign companies to be riskier than their local counterparts. Rightly so, we understand our own markets and economy better than any other. But there’s one prospective investment that strikingly stands out in the pool of foreign stocks. China’s equivalent of Amazon.com, Inc., Alibaba Group Holding Limited (NYSE:BABA) is my favorite foreign pick due to the nature and scope of its business. BABA stock is trading below its initial public offering (IPO) price at the moment. Here’s why those betting against Alibaba stock could be kicking themselves later.
Alibaba is laying its tentacles on any and every industry it sets its eyes on. The latest of its moves is to buy news media assets of South China Morning Post (SCMP). This move follows the five other news media acquisitions the company has made in the last two years. With a strong portfolio of media assets, Alibaba is set to become a news powerhouse in China.
In the last two years alone, Alibaba has expanded by leaps and bounds. The company has been making major investments and acquisitions left and right, including companies involved in filmmaking, video streaming, ticketing, Uber-like car-sharing services, smartphone manufacturing, social messaging services, and now news and publications media, in addition to its core e-commerce business. You name it, Alibaba has it.
I wouldn’t be surprised if Jack Ma’s next move is to aim for the skies—literally. If one retraces Ma’s steps, he’s been closely following at the heels of Amazon’s Bezos. Like Jeff Bezos, who has taken Amazon from an average e-retailer to a technology conglomerate, Ma seems to be actively working on the same lines.
Oftentimes, I come across companies that tout double-digit growth, but are placed in a slowing industry. At a glance, they look promising, but dig a little deeper and you are assured that eventually, these investments would tank. On the other end of the spectrum are companies that are favorably placed in growing industries, yet they’re not posting any growth. Clearly, these investments are duds.
But when one comes across an investment where both the company and the industry growths are robust and promising, one would be a fool to not take it up. Alibaba is one such investment. The company boasts double-digit growth in the world’s most populous country and in an industry that is expected to witness massive growth in the next five years.
According to Ericsson’s latest mobility report, China is predicted to be the biggest market for the Internet. The report predicts 5G to be the future of the Internet, with China taking the biggest market share. (Source: “Ericsson Mobility Report,” Ericsson, November 2015.) The Chinese market currently has more than 350 million LTE subscribers and the number is expected to hit 1.2 billion by 2021.
Undoubtedly, China will become the biggest hub of e-commerce and Internet services (as if it’s not already) and the biggest winner will obviously be the strongest player. Need I say more?
The Bottom Line on BABA Stock
Alibaba beat the Street estimates in the latest quarter and considering Alibaba’s impressive gross merchandise value (GMV) figures on Singles’ Day, the next quarter is expected to be no different. We won’t be wrong to predict the same valuation for BABA stock as its American counterpart, AMZN stock. After all, the only thing that sets them apart now is profitability; the former is making money, while the latter is losing it and yet is a pricier stock on the market.
Rest assured, you can’t go wrong with investing in a double-digit growth company in a double-digit growth industry. BABA stock could be poised for huge gains in the coming year.