Alibaba Stock Is Like Marrying Amazon, Google, PayPal, Facebook & UPS

Alibaba StockAs you may recall, Alibaba Group Holding Ltd (NYSE:BABA) was the largest U.S.-listed initial public offering (IPO) in history. Alibaba stock raised nearly $25.0 billion on its NYSE-listed debut on September 19, 2014.

But well before BABA stock was trading, and back in the old days of corporate raiders, leveraged buyouts, and Drexel Burnham Lambert, a private equity firm by the name of Kohlberg, Kravis & Roberts,  now a public company called KKR & Co. L.P. (NYSE: KKR), cobbled together a corporate behemoth called Beatrice. Beatrice started out as a food company but, by the time it was sold in 1990, it was a mega-conglomerate that owned everything from Hunts catsup and Dannon yogurt to Airstream trailers and Avis car rentals, to Samsonite luggage and Harmon Kardon sound systems. (Source: “Beatrice Archives”, Beatrice, last accessed September 6, 2016.)

If you can wrap your head around a company as diversified and complex as Beatrice, then understanding Alibaba stock will be a snap. When BABA stock went public, commentators described it as a mix between Google (now Alphabet Inc) (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and PayPal Holdings Inc (NASDAQ: PYPL). But BABA stock is much more complex than that. To get closer to what Alibaba stock is, you’d have to marry Google, Amazon, and PayPal and then you’d have to toss in Facebook Inc (NASDAQ:FB) and United Parcel Service, Inc. (NYSE:UPS), as well as a few others that I won’t add to the list.

In essence, Alibaba stock is everything digital, from e-commerce to mobile social media and digital entertainment distribution, to online payments and financial services, to logistics and local services (everything from tickets to movies, concerts and sporting events, to your regular manicure, to groceries for tonight’s dinner), to data management and cloud computing. (Source: “2016 Investor Day,” Alibaba Group Holding Ltd, June 14, 2016.)

Alibaba Stock Truly Is a Mixed Bag

Alibaba has a hand in everything (except actually making the hard goods) that it takes to get a product into the hands of consumers in China.  It operates e-commerce portals (including mobile apps) Taobao, Tmall, Aliexpress, Sina Weibo, and Youku, and it operates Cainiao, a data-driven logistics platform that routes shipments to various service providers to make sure packages are routed and delivered to consumers in the most efficient, timely manner possible. (Source: “Logistics in China: Scale and Uniqueness,” Alibaba Group Holding Ltd, last accessed September 6, 2016.)

Through Ant Financial, Alibaba even has a hand in the payment processing of transactions made across all of its e-commerce properties. But here too, Ant Financial is more complex than that. It offers wealth management, insurance, small business financing, and even operates as a credit bureau akin to TransUnion (NYSE:TRU) and Equifax, Inc. (NYSE:EFX) in the United States. (Source: “Ant Financial,” Alibaba Group Holding Ltd, last accessed September 6, 2016.)

And powering all of this is an enormous cloud computing capability.

alibaba group holding ltd nyse chart

Chart Courtesy of Stockcharts.com

The Bottom Line for BABA Stock

Put all of these pieces together and what you have is a rapidly growing company in what is still a rapidly growing emerging economy that has had a few fits and starts regarding earnings over its short time as a public company. But sales growth is up almost 49% from the year earlier and earnings per share (EPS) for BABA stock, in the last quarter, was up 160% from the previous one.(Source: “Alibaba Group: (BABA)”, Zacks, last accessed September 6, 2016.)

Alibaba stock is up about 80% from its 52-week low and it trades at about 50 times earnings, so it isn’t cheap.  But, if you believe that the Chinese economy will continue to grow over the course of the next decade, and you believe that this Internet thing isn’t going to go away, then BABA stock could be an investment that could still improve with time.