Alibaba Group Holding Ltd (BABA) hasn’t been an easy stock to own this year. Alibaba stock is down more than 20% year to date, and that’s factoring in the nearly 40% bounce off the late September low. Yet, with that rebound effort still mostly intact and a big revenue catalyst due this Wednesday, Alibaba stock might finish the year on a bullish note.
That catalyst is China’s so-called Singles Day … an event not unlike Valentine’s Day in the western world, only in reverse. That is, rather than splurging on a loved one, consumers — presumably single — splurge on themselves.
It may have started out as something of a joke, with singles having a little fun laughing at themselves. But Alibaba CEO Jack Ma has quickly turned it into a massive online shopping event that since 2012 has easily trounced the amount of e-commerce done by U.S. shoppers on Cyber Monday.
This year’s event may well reignite the recent fire under BABA.
Singles Day
Although it has been lurking around with China’s unofficial cultural mores for a couple of decades now, Singles Day didn’t unofficially become an official “thing” until 2009 or so, when Alibaba applied some leverage to the idea as means of driving sales.
The date for the event is Nov. 11 — or 11/11 — every year. The reason for that date is rumored to be the appearance of four “1” characters in a row, which is something of an homage to bare (single) sticks. In fact, in China, Singles Day is called the bare sticks holiday.
Regardless of its name and origins, it’s unlikely Jack Ma ever envisioned it turning into the event it did. Last year, Singles Day drove $9 billion in sales for BABA, well up from the couple-hundred million generated on the day in 2010.
For perspective, last year’s Cyber Monday top line was roughly $2.7 billion.
This year is apt to be even bigger, too, with some pros predicting total Singles Day sales in China to reach as much as $12 billion for BABA alone. That would mean another near-30% improvement in year-over-year sales growth. Others are calling for as much as $13 billion in e-commerce revenue that day, fueled by a greater number of vendors selling their goods online.
What’s it Mean for Alibaba Stock?
While a fun story, even at full throttle it seems difficult to believe that the Singles Day mania could be a game-changer for Alibaba. But, it just may be… though not for the reason you think.
As big as BABA has become in China, and as rapidly as it’s done so, the bulk of the company’s opportunity is still in front of it, rather than behind it.
As of the last numbers, Alibaba claims 367 million different customers have made at least one purchase at its e-commerce website within the past year. The number is measurably bigger than the entire population of the United States, which tallied 319 million as of the last look. But, Alibaba’s headcount of 367 million means the other nearly 1 billion of the nation’s 1.36 billion citizens are not yet regular customers. What better time for BABA to make that conversion than Singles Day?
Better yet, China itself is not only in the midst of the rise of Internet availability (unlike the United States’ entry into the Internet era being ushered in over cable and telephone wires), China’s evolution is unfurling on the wings of wireless connectivity where BABA dominates.
And that tide as a whole is rising, too. The number of Internet users in China grew by 31 million in 2014 to 649 million. A total of 557 million of that 649 million, however, were counted as mobile Internet users — a figure that grew by 57 million.
It’s a trend that owners of Alibaba stock should care about, as 86% of the company’s e-commerce was done on a mobile device in 2014, and there are still another 800 billion Chinese who’ve yet to access the Internet with a mobile device.
They’re coming though, sooner or later, and with so much buzz and momentum surrounding the company and the industry right now, 2015’s Singles Day could, at the very least, be a solid customer-acquisition tool.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
