Some companies are obviously better positioned than others for a post-pandemic world. Amazon (NASDAQ:AMZN) immediately comes to mind. With brick-and-mortar stores closed, Americans shopped online like never before. But there’s another option to consider in terms of investing for the post-pandemic world: Alibaba (NYSE:BABA) stock.
The Chinese e-commerce giant is much cheaper than AMZN. And Alibaba stock is positioned for big growth thanks to a recent, massive bet on cloud infrastructure.
E-Commerce Gets a Boost
Over the past decade, e-commerce has upended the retail landscape. My list of F-rated stocks has more than its fair share of brick-and-mortar retailers who are crumbling as they fail to adapt. Macy’s (NYSE:M) makes the list, for example.
The situation has been dramatically escalated by the novel coronavirus. Retail stores were forced to lock their doors. Consumers shrugged and shifted to doing almost all their shopping online. While many companies laid off staff, Amazon hired an additional 175,000 associates to handle the massive surge in online shopping.
The same surge in online shopping was seen in China. But in that country, the e-commerce powerhouse isn’t Amazon, it’s Alibaba. There were concerns that the coronavirus would ultimately hurt sales, because consumers were hunkering down and not spending as much as usual. That turned out to be a non-issue. At least for Alibaba. For the quarter ending March 31 (the period when China was most heavily hit), Alibaba posted year-over-year revenue growth of 22%.
Despite the coronavirus, Alibaba announced it had passed a record threshold for its fiscal year 2020. With 960 million active customers globally, BABA sold over $1 trillion worth of merchandise across its network.
The pandemic is likely to have changed shopping habits permanently. Many consumers will stick to the convenience and safety of online shopping instead of venturing back into stores. That’s bad for traditional retailers, but great news for e-commerce leaders like Amazon and Alibaba. It’s a big reason why Alibaba stock gets an A grade in my Portfolio Grader, but there’s more to the story.
A Massive Cloud Computing Investment
There was another big shift as a result of the coronavirus. Not just shopping, but seemingly everything went online. Work meetings. Movies. Online video gaming took off. All that online activity requires cloud computing centers.
Once again, Amazon is a leader here. In fact, after years of heavy investment, its Amazon Web Services (AWS) is one of the world’s largest cloud computing providers. And AWS now accounts for roughly three-quarters of Amazon’s profit.
Guess who else is a big player in cloud computing? That’s right, Alibaba. Its Alibaba Cloud is in fourth place globally, but it is also the fastest growing. And it’s about to get a lot bigger. In April, the company announced it was investing an additional $28 billion into its cloud infrastructure over the next three years. It’s ramping up for increasing demand in a world where online is more important than ever:
“By increasing our investment on cloud infrastructure and fundamental technologies, we hope to continue providing world-class, trusted computing resources to help businesses speed up the recovery process, and offer cloud-based intelligent solutions to support their digital transformation in the post-pandemic world.”
Bottom Line on Alibaba Stock
Amazon and Alibaba are two companies with many similarities — including their perfect positioning to thrive in a post-pandemic world.
Amazon stock is up 478% over the past five years and 34% in 2020. Alibaba stock on the other hand is up a much more modest 125% over the past five years. It’s actually off by 2.6% so far in 2020. BABA is much cheaper, and I think it’s the better long-term growth play. In particular, the company’s continued investment in cloud computing is going to pay off in a big way. The coronavirus pandemic just made that already safe assumption all but a certainty.
Based on what’s happened with Amazon and AWS — and with Alibaba stock down in 2020 — now is the time to get in on the action.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.