Alibaba - A Better Buy Than Ebay Or Amazon?

I. Thesis and summary

Open Sesame!

Alibaba Groups’ IPO, underwritten by Citi Croup, N.A., the global e-commerce company based in Hangzhou, China, offered common shares to the public on September 17, 2014. Shares traded in high demand, and raised more than $21B for the Former CEO and Founder Ma.

The market’s voracious appetite catapulted Alibaba to a mammoth figure of $227.5B capitalization. At that cap, Alibaba is 3.5x larger than eBay’s $65.4B and 1.5x bigger than Amazon’s $150.2B

Similar to the $349B Google Inc., Alibaba appears to defy value investing logic, as the stock is delivering outstanding growth.  But regardless of however promising this growth may seem, Alibaba still has fundamental concerns and should be examined by prudent investors.

II. Alibaba Group

baba_business_model.png


Source: Alibaba

Founded in 1999 by English Lecturer Jack Ma, along with 18 other people, Alibaba Group Holding Ltd. (NYSE:BABA) is based in Hangzhou, Mainland China. The company is operating e-commerce businesses, including business-to-business, online retail, digital payment services, and delivering a shopping search engine as well as cloud computing services. Led by Ma, who initially built the platform to help small business owners in China have access to larger markets, thus, competing on more equal terms with larger corporations.

Size Limits Growth, Seems Like Ingenuity and Value Bent Logistic

Over the years, Alibaba had grown rapidly to become an elite global e-commerce, overshadowing even eBay Inc (NASDAQ:EBAY) and Amazon.com, Inc. (NASDAQ:AMZN).

According to Alibaba, “Our success and rapid growth is built on the spirit of entrepreneurship, innovation, and an unwavering focus on meeting the needs of our customers. We believe that a strong sense of shared values enables us to maintain a common company culture, no matter how large we grow.”

“Values are fundamental to the way we operate and how we recruit, evaluate and compensate our recruit.”

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Disclosure: We are neither long nor short on BABA, EBAY, and AMZN. However, we are long on ...

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