You can have my Alibaba (NYSE:BABA) stock when you pry it from my cold, dead hands.
Bets on China coming out of the novel coronavirus better than the U.S. are paying off. Alibaba is joining other Chinese internet companies in hitting new highs. Shares opened July 6 at $233 each. That’s a market capitalization of $593 billion on fiscal 2020 sales of about $72.5 billion. The price-earnings ratio is now over 28.
Alibaba has numbers most American companies can only dream of. Last year $21 billion of that $72 billion in revenue hit the net income line. Revenue was up 28%, even when the pandemic was at its height in China. When Alibaba next reports earnings, analysts expect $21 billion of revenue, up 31% from just the last quarter. They also see profits up over 50%.
Can Alibaba Beat the American Cloud Leaders?
While American politicians debate breaking up our cloud leaders, or at least putting a regulatory straitjacket on them, China’s stars are charging ahead.
Facebook (NASDAQ:FB), the smallest of the American cloud owners by market cap, is now worth barely 10% more than Alibaba. Alibaba isn’t even the hottest Chinese cloud stock. Tencent (OTCMKTS:TCEHY) and JD.com (NASDAQ:JD) are doing better in 2020.
Instead of focusing on that competition, American politicians want to banish the Chinese companies. A bill to delist Chinese companies that refuse to meet U.S. accounting standards is before the House of Representatives and could pass.
Meanwhile, Alibaba goes from strength to strength. The June results could deliver a dramatic boost to the stock, because they will feature numbers from 618, yet another shopping holiday. Alibaba and JD handled $136.5 billion of business around that day alone.
Alibaba plans to cut delivery times to 24 hours in China, and 72 hours internationally. It will do that by quadrupling the number of airplane charters it uses over the next nine months. Alibaba is helping Chinese farmers come back from the pandemic with a Rural Support program that pre-sells produce. The company is hiring an army of online “influencers” to tout its products in international markets.
While Amazon (NASDAQ:AMZN) focuses on competing with Walmart (NYSE:WMT) online, it’s Alibaba that’s the competition. Not just in China, but here. Alibaba plans 20 virtual “trade shows” for the United States, which is now its fastest-growing business-to-business market.
It’s all possible because Alibaba is now the third-largest cloud provider, according to Gartner Group, and beating Amazon in Asia. Alibaba plans to add 5,000 workers at its cloud unit alone by the end of 2020.
While Facebook struggles to get approval for its Libra digital currency, Alibaba’s Ant Technology had a $150 billion valuation two years ago, and is growing fast.
Things aren’t perfect. Alibaba recently fired Zhao Yan, head of its livestreaming division, after he got his girlfriend a job there and took bribes from business partners. The company is also struggling in Indonesia, and recently brought in a tech expert from China to improve results there against Shopee. Shopee is a unit of Sea Limited (NYSE:SE), and it’s backed by Tencent.
The Bottom Line on Alibaba Stock
America practically invented the cloud and e-commerce. During the pandemic, these are the hottest parts of the U.S. market.
Rather than celebrate and push ahead, politicians are trying to hobble these American leaders. At the same time, Alibaba and the other Chinese cloud stars — JD.com, Tencent and Baidu (NASDAQ:BIDU) — continue to catch up, unhindered by government interference.
It’s almost enough to make this American wonder which country is more capitalist, America or China. From the point of view of investment, the answer right now looks obvious.
Buy Alibaba stock.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned shares in FB, AMZN, JD and BABA.