“Double 12” Could Send BABA Stock Soaring
Investors should still remember Alibaba Group Holdings Limited’s (NYSE: BABA) great achievement on Singles’ Day last month and the subsequent surge in the BABA stock price. However, there’s now more to the story; Alibaba is planning another shopping day event for December 12, nicknamed “Double 12.” With customers rushing towards great deals, success on Double 12 might give another boost to Alibaba’s stock price.
Could Alibaba’s Singles’ Day Success Repeat in December?
Let’s first revisit the record numbers for the company from this past Singles’ Day. On November 11, 2015, Alibaba’s gross merchandise volume (GMV) increased 60% year-over-year to $14.3 billion, marking the company’s greatest shopping day in history. Alibaba’s payment system, “Alipay,” processed a total of 710 million transactions during this year’s event. (Source: “Alibaba Group Generated USD 14.3 Billion of GMV on 2015 11.11 Global Shopping Festival,” Alibaba Group, November 12, 2015.)
What did the great results do to Alibaba’s stock price? Well, since the company announced its Singles’ Day results, BABA’s stock price has climbed 9.8%, from $75.85 to $83.28 per share.
December 12 could very well be another huge success for the company, because other than at online venues, Alibaba has also launched enormous deals offline. But how would an e-commerce company benefit from transactions not done on its online marketplace? The answer: Alipay.
You see, Alipay is the digital wallet of choice in China. The payment system can be used in virtually every area of people’s life, including purchases made while shopping at malls, eating at restaurants, getting groceries, and more. However, Alibaba wants to expand Alipay’s user base further and that’s when “Double 12” comes into play.
Chart courtesy of www.StockCharts.com
This time, Alipay is partnering with hundreds of thousands of local businesses, including restaurants, supermarkets, beauty salons, movie theatres, and even airports and gas stations. The company is spending more than one billion yuan in this event to give enormous deals to consumers. The deals would start as early as December 7. On the day of December 12, consumers using Alipay are going to get 50% off at a lot of places.
By doing so, Alipay gives some serious incentive for new customers to start using its service. Also, after new customers start to use the payment system, they might also start to use Alibaba’s e-commerce platform, which also uses Alipay, thus bringing offline consumers to the company’s online retail platform. (Source: “Alipay Partnering with 300,000 businesses, Investing 1 Billion Yuan in Double 12 Festival,” Sina.com, December 3, 2015.)
Other than embracing the mass market in China, Alibaba is also expanding its global presence with its online shopping web site AliExpress. To understand where the appeal is, just take a look at this super-thin smartphone case costing a few dimes. In November, The Moscow Times reported that AliExpress expanded so fast that its web site views in Russia had surpassed Facebook’s. (Source: “Local Brands Jump on AliExpress Bandwagon,” The Moscow Times, November 9, 2015.)
The Bottom Line on BABA Stock
BABA stock has been getting a lot of attention from Wall Street. Among the 42 analysts currently covering the company, 32 give it a “Buy” rating, three rate it “Overweight,” six rate it a “Hold,” while only one rates it “Underweight” and none rate it a “Sell,” meaning the average rating sets Alibaba stock as a “Buy.” (Source: “Analyst Estimates for Alibaba,” Market Watch, last accessed December 4, 2015.)
With the success of its Singles’ Day and the potential success of Double 12, Alibaba is very likely going to have a great quarter. Investors like solid growth and strong potential and it might just reward BABA stock with a higher price tag.