Alibaba Group Holding Ltd Welcomes Coronavirus
Stock markets around the world are currently hemorrhaging on fears that the spread of the coronavirus will put a brake on global economic growth. That’s a valid argument, but there are companies such as Alibaba Group Holding Ltd (NYSE:BABA) that will likely benefit from the virus outbreak.
A look at the BABA stock chart reflects its outperformance against the S&P 500. Alibaba stock traded at a record high of $231.14 on January 13 prior to the coronavirus news.
More recently, Alibaba shares advanced 3.3% over the past five sessions (as of March 5), versus 2.6% by the S&P 500 in that same period. Over the past month, BABA stock dropped by 4.1%, beating the 8.3% decline by the S&P 500.
Chart courtesy of StockCharts.com
The recent tailwinds for Alibaba stock are due to the negative impact of the coronavirus outbreak on brick-and-mortar retailers in China.
If you have ever been to China, one thing you would have noticed is the staggering use of online shopping by Chinese consumers. So you can understand why the current situation is positive for Alibaba Group Holding Ltd.
Alibaba is the top online e-commerce player in the country, and it’s only going to expand.
How BABA Stock Will Benefit From the Coronavirus
The emergence of the coronavirus has led to a deep shutdown in China. Wuhan (the city that’s the breeding ground for the virus) remains under quarantine, and the fear of catching the virus has spread across the country. Among other things, the Chinese government has advised people to avoid large gatherings.
While the country is slowly moving toward getting its economy up and running again, there is a long way to go, and many people are still staying home.
For Alibaba Group Holding Ltd, the coronavirus will likely drive consumers to its online business because they fear getting sick by going out in public.
In particular, Alibaba’s online grocery delivery unit, “Tmall Supermarket,” will probably be a major benefactor from the virus outbreak. People still have to eat, so it’s an ideal situation for Alibaba stock investors.
The Tmall Supermarket platform, which counts over 500 million active shoppers, sells more than just groceries and everyday products. It also sells items like apparel and durable goods.
As explained earlier, the impact of the coronavirus is a tailwind for Alibaba Group Holding Ltd, and I’m convinced that the company’s first-quarter numbers will reflect this.
But even after the coronavirus fades, Alibaba will continue to expand its presence in China, where the move toward online retail should benefit BABA stock.
Therefore, astute investors with a long-term investing horizon could reap major returns from Alibaba stock.