It’s a rare moment when the CEO of one publicly traded company presents the investment thesis of another. Yet that’s exactly what happened with Tesla’s (NASDAQ:TSLA) Elon Musk, who indirectly gave investors yet one more reason to consider Alibaba (NYSE:BABA) and Alibaba stock.
In a glaringly honest assessment of China’s working culture, Musk stated:
China rocks in my opinion. The energy in China is great. People there – there’s like a lot of smart, hard-working people. And they’re really — they’re not entitled, they’re not complacent, whereas I see in the United States increasingly much more complacency and entitlement especially in places like the Bay Area, and L.A. and New York.
CNBC contributor Lora Kolodny noted that New York and California, two states that Musk criticized, have supported his businesses with “considerable tax breaks, regulatory credits and other government help.” However, Musk shouldn’t back down from his statement. He’s absolutely right. And this narrative is why, in the nearer term at least, you can trust Alibaba stock.
Tesla’s head executive really hit the nail on the head when he added, “The United States, and especially like California and New York, you’ve been winning for too long. When you’ve been winning too long you take things for granted.”
Frankly, Americans have lost the hunger to compete. We’re probably number one in making excuses but not much else. It’s the opposite situation in China. Forget the geopolitical tensions for a moment. You don’t see many Chinese people wage war against themselves like you do here.
This social stability is one positive for Alibaba stock. And it has a tangible impact.
Collective Smart Thinking Protected Alibaba Stock
Say what you want about the Chinese Communist Party – if you lash out at them, you won’t find me refuting you. However, you’ve got to respect the Chinese attitude toward the novel coronavirus pandemic.
When the country went into lockdown mode, they locked down. They didn’t protest nor did they riot. More importantly, they followed guidance from scientific experts without drama or complaint. In other words, they didn’t listen to Fox News or whatever is the equivalent of it in China.
According to a McKinsey & Company survey, Chinese consumers have gradually exercised out-of-home activities. However, they’re being reasonable, demonstrating the greatest wariness toward attending large events.
Obviously, this is hugely important for Alibaba stock. In its home market, the people aren’t stupid, to Musk’s point. Instead, they’re waiting for key milestones to participate in higher-risk activities. In contrast, many people in the U.S. seemingly have no qualms about attending large parties. This suggests many of us are not taking the virus seriously.
Put another way, Chinese consumers and workers are adapting to the new normal. Because of this, their nation’s economy is better for it.
Back when the initial coronavirus breakout occurred in China, the urban unemployment rate jumped to 6.2% from 5.2%. Around the same time, Alibaba stock slipped from an average price above $210 to below $195.
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But as the urban employment situation improved, so too did BABA stock. In other words, the bullishness in BABA makes sense. There’s no disagreement between market premiums and fundamental indicators, key among them the unemployment rate.
Really, it’s smart, unselfish (i.e. non-entitled) collective thinking that allowed the Chinese to credibly combat the coronavirus. And that’s a positive for Alibaba stock no matter how you look at it.
Chinese Money Stays Home
Not surprisingly, many countries have a deep suspicion about Chinese tourists in the wake of the coronavirus pandemic. For instance, many Europeans oppose the idea of Chinese visiting their home countries, despite the importance of tourism dollars.
To be fair, the Europeans are most suspicious about the British. And they have no love for Americans. However, Chinese tourism spending has skyrocketed over the past few years. Losing those yuan will have a conspicuously negative impact on high-demand tourist spots.
However, it may have a positive effect on China’s economy, and therefore, Alibaba stock. If Chinese tourists are unwanted worldwide – and let’s be honest, that’s the case right now – that money will be spent at home.
Nevertheless, I’m not naïve to the fact that a meltdown in the U.S. economy will be bad for everybody. Therefore, I’d be careful about loading the boat on Alibaba stock. But as I said earlier, in the near term, the bullish case for BABA is a valid one.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
