Alibaba Is Up Big. Will Gains Continue?

Alibaba (BABA) has had a rough time in the market over the past several months. That is, until February 12. Since then, the stock has been climbing in a big way, and for good reason. The company made the decision to buy a sizable stake in Groupon (GRPN). Today, we'll talk about the stake Alibaba purchased in Groupon, why the purchase is causing big gains, what we can expect to see moving forward, and how binary options traders can take advantage of the trends. So, let's get right to it…

Alibaba Stock New

[Image Courtesy of Wikipedia]

Alibaba Buys A Large Stake In Groupon

In February, Alibaba made a huge move. It made the decision to buy a large portion of the online coupon website known as Groupon. In fact, Alibaba purchased a 5.6% stake in the company. While that's a huge investment, it's also a very strong move for Alibaba, not just in terms of return on investment. In fact, I don't think the investment was made for the return at all, instead, I think the investment was made for Alibaba's own growth. Let me explain…

Why Investing In Groupon Is Great For Alibaba

The investment in Groupon is an incredible investment for Alibaba. However, that has very little to do with the returns that Alibaba will see from the investment. The more important aspect is access to technology. You see, Alibaba is China's largest online retailer, but that doesn't mean that it is free of competition. In fact, competition in the industry is becoming more and more of a problem, and some companies have already ventured into the paid coupon space. So, to keep up with the competition, Alibaba is going to have to start thinking about offering paid coupons as well. By investing such a large amount of money into Groupon, Alibaba now has access to the technology and can use the information to build its own coupon site that's targeted to Chinese consumers. It's also rumored that over time, Alibaba may actually acquire Groupon, giving it full access to the technology that has been years in the works.

How The Market Reacted To The News

As binary options traders, we know that the news moves the market. It's clear that investors are excited about Alibaba's investment in Groupon. In fact, since the announcement was made in mid-February, the stock has climbed by nearly 10% and seems as though it's going to continue on the uptrend.

What We Can Expect To See Moving Forward

Moving forward, I have an overwhelmingly positive opinion of what we can expect to see from Alibaba. The reality here is that Jack Ma, the founder and CEO of the company is an absolute genius. Since the creation of the company, he has been able to stay one step ahead of the competition, leading to Alibaba's leadership role in online retail, online payments, and more in the world's second largest economy. Now, Jack Ma has his eyes on selling extreme discount coupons, and to do so, he's made one of the strongest investments we've seen from a company in the sector in history. All in all, things are looking great for Alibaba in both the short and long term.

How To Take Advantage Of The Trends

As binary options traders, its our job to predict where the values of financial assets are headed. Because of the positive news we've seen out of Alibaba lately, it's more likely that the stock will climb than fall. As a result, binary options traders should be watching for strong call option opportunities in order to take advantage of the trends.

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Comments

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Kurt Benson 8 years ago Member's comment

I went from being a huge fan of $BABA to having serious doubts. But this is an interesting investment. I'll have to let it percolate a bit. I'm still not sure if this is a wise investment on their parts, though I suppose they have money to spare.

Bill Myers 8 years ago Member's comment

I like $BABA, but I'm not a fan of $GRPN and don't think the company will last.

Carl Schwartz 8 years ago Member's comment

I thought Groupon grew at a rate of 24% last year. Sounds like it's doing well to me. And it's got major brand recognition.

Bill Myers 8 years ago Member's comment

It did, but it's not making any money. Groupon has reported a net income loss for each year it’s been public. I know in 2014 they lost $73 million.

Cynthia Decker 8 years ago Member's comment

While that's all true, I believe $GRPN finally became profitable in 2015. They just had to lose several billion to get there :) So it could be a good time for $BABA to invest. Can any one else confirm those numbers? Maybe the author, @[Jack Turner](user:24829) knows.

Jack Turner 8 years ago Author's comment

Sure. $GRPN made profit only in Q2 2015 which equalled $109M while there was a loss during the rest of the quarters of the year totalling -88.4M meaning $GRPN annual earnings were still higher than losses.

The data is sourced from www.google.com/finance?q=NASDAQ:GRPN&fstype=ii

Jack Turner 8 years ago Author's comment

Sure. $GRPN made profit only in Q2 2015 which equalled $109M while there was a loss during the rest of the quarters of the year totalling -88.4M meaning $GRPN annual earnings were still higher than losses.

The data is sourced from www.google.com/finance?q=NASDAQ:GRPN&fstype=ii

Barry Hochhauser 8 years ago Member's comment

I saw one of the other contributors here, @[Amigobulls](user:17330), had something about this. So maybe they can add something. I'll look for it as well.

Barry Hochhauser 8 years ago Member's comment

I found it, Groupon's Income Statement: amigobulls.com/stocks/GRPN/income-statement/annual