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2 Reasons Alibaba Group Holding Ltd (BABA) Stock Is Even More Enticing

Alibaba Group Holding Ltd (NYSE:BABA) shares continue to move closer to all-time highs thanks to impressive continued growth in China and new international markets. BABA stock is certainly not done running and has a promising future with the company’s Cloud division and international expansion.

2 Reasons Alibaba Group Holding Ltd (BABA) Stock Is Even More Enticing

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Alibaba Australia is the latest in a series of moves to diversify away from China and the company’s core business line.

BABA opened a headquarters for its Australia/New Zealand operations in Melbourne. The headquarters will help the company expand its already strong relationship with Australia and continue to expand its Cloud offerings outside of China. Alibaba plans on building this headquarters to create operating infrastructure, online payments and cloud computing.

Why Alibaba Australia Is Good News for BABA

Businesses in Australia and New Zealand have been using Alibaba and its Tmall store to get its products into Asia. More than 1,300 Australian brands and 400 brands from New Zealand have products on Tmall. For many of these brands, Tmall was their entry point for China. Australia ranks as the fourth-highest selling country on Tmall, showing the strength of the relationship between it and China.

Along with the introduction of a headquarters in Australia, the company has collaborated with Australia Post. This deal will strengthen trade between Australia and Southeast Asia, and ultimately strengthen BABA stock as well. The deal centers around Lazada Group, an Alibaba majority owned subsidiary, that will help bring Australia Post to regions like Malaysia, Singapore and Indonesia. Lazada provides merchants direct access to more than 560 million consumers in six countries.

Brands like Chemist Warehouse, Swisse, and Balckmores are among the top brands selling on Tmall from Australia. Popular categories that have helped Australia see strong Chinese sales are health and nutrition, milk power, snacks, coffee and instant beverages.

BABA is heavily investing in Australia, with attention being paid to cloud computing and also the selling of goods between Asia and Australia. Alibaba is also actively exploring the real estate market of Australia, which could represent the e-commerce giant’s early intentions to take on another area of revenue.

The company is considering selling apartments and also facilitating payments for deposits or settlements of apartments through its Alipay payment service. This is just another example of BABA stock spreading itself into new areas through its already existing strengths.

The Cloud Computing segment for Alibaba still makes up a fraction of its revenue. However, this unit is fast growing and the company believes it can outpace current worldwide leader, Inc. (NASDAQ:AMZN). In the last full fiscal year, the Cloud Computing segment made up $648 million in revenue. Compare that to the company’s Core Commerce division and its $14.7 billion revenue and it doesn’t look like much.

The investments made by Alibaba in its Cloud division continue to represent the number one reason to buy BABA stock. Alibaba has placed new facilities in four regions to help boost its Cloud division. New Cloud facilities are in the United Arab Emirates, Australia, Japan and Germany.

In four years, the company believes it can overtake AMZN as the No.1 cloud provider in the world. Alibaba currently ranks first in China and in the top five worldwide.

BABA stock recieved some major positive news for the Cloud division, when it signed a 12-year deal to provide cloud services to the Olympic Games. This deal also covers an e-commerce platform to sell Olympic branded goods. Alibaba is now able to use its dominance in both commerce and cloud to attract new customers and countries for expansion. BABA will also optimize an Olympics Channel for the Chinese audience.

Bottom Line on BABA Stock

The financial performance of the company’s Cloud division continues to amaze and might explain some of the recent gains. In the recent quarter, overall revenue was up 54%. The company’s main Core Commerce division gained 45% from the prior year. Cloud revenue grew a brilliant 115%.

Another key driver for growth is international commerce, which grew 288% from the prior year. Take what you learned from the company’s focus and investment on Australia and both of those great growth figures are headed even higher in 2017.

BABA stock investors seem to be missing how important this deal in Australia is and the company’s recent cloud infrastructure expansion in new international markets are. China’s e-commerce continues to grow and Alibaba is a clear winner. The company is not standing still and staying content with just that growth. China is attacking a high-growth cloud market and will come out victorious.

BABA stock has performed well over the last year, rising 54%. Alibaba shares are up 17% in the short 2017 year, yet BABA stock is still up only 10% from its highly valued IPO.

With the company’s expansion beyond China and just being an online retailer, Alibaba is a big buy for investors. I was bullish nearly a year ago sharing BABA stock as a way to invest in the growth of the Chinese movie business. That remains true today and with the focus on cloud computing, investors have even more reason to buy this Chinese giant.

As of this writing, Chris Katje did not hold a position in any of the aforementioned securities.

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