Everything happens fast nowadays. The curve steepens and shortens especially in the tech world. It’s hard to believe that Alibaba Group Holding Ltd (NYSE:BABA) has only been up and running for 18 years. During that time Chairman, Jack Ma, has built one of the most formidable global ecommerce companies that is closing in on a half billion dollar market valuation.
Being a homegrown mainland Chinese company, BABA has been able to navigate the waters there much more adroitly and profitably that foreign companies. And then, leveraging its scale and suppliers, the company continues to expand its reach in all directions.
It listed on the New York Stock Exchange just three years ago facing many naysayers and China bears. BABA has clearly proved them wrong. Since its public listing the stock has delivered returns of 86%. Most of the performance has been in part due to the overall buoyant investor sentiment toward tech companies this year, but during the past few years, BABA has proven that it is a true competitor across multiple industries.
But the past is the past, and at the 18th anniversary employee gathering, the focus was all about the future. Ma stated that, “…compared to the future, we have only just come of age. The future holds endless possibilities and imagination for Alibaba…”
With a nod towards giving back and doing good for the broader economic community, Ma further emphasized:
“Over the past three years we delivered on short-term financial goals, but our true purpose lies in harnessing the power of technology and innovation to make the world economy more inclusive and more healthy toward sustainable development.”
BABA’s Future
Ma’s words may be sound altruistic, but they are built on the success of the company’s underlying enterprise. Taobao Marketplace, Tmall, Juhuasuan (flash sales), and 1688.com all fall under the Alibaba banner. From retail to wholesale to mobile to online, BABA’s presence is felt everywhere.
New Retail and New Finance are particularly interesting given what BABA can leverage from its 18 years of deep operational experience. These also happen to be industries ripe for disruption, and BABA is well positioned to be that disruptor.
Cainiao Network
In another step that takes it further toward its goal of the “Five New,” BABA has taken a majority share in Cainiao Network with a commitment to invest over $15 billion to expand the logistics network. The money will go toward R&D, data technology and smart warehousing advancements. These are changes that will solidify BABA’s future in the global logistics business.
This investment dovetails with the New Retail strategy, which is Alibaba’s logistics affiliate. It’s a move that takes BABA closer to its mission of fulfilling domestic orders within 24 hours and globally within 72 hours. With such ambitions, it’s no wonder that BABA feels that these are still the early innings.
The Bottom line on BABA
No other company rivals Alibaba’s global footprint. Where some who have been major successes in the U.S. have failed abroad (China specifically) and vice versa, BABA is unique in that it is a powerhouse across oceans. And where its presence is not significant, they are taking methodical steps through acquisitions and partnerships to get there.
Given the growth profile and investments in valuable assets like Ant Financial, BABA trades at a reasonable 58x trailing earnings. It’s not too much to pay for a mover and shaker of the 21st century.
At the time of this writing, Luce Emerson did not hold a position in any of the above mentioned securities.
