outline
China's No. 1 e-commerce company and No. 1 cloud company. At one time, it was called the most likely candidate for the No. 1 market capitalization company. Let’s find out whether Alibaba will rebound and succeed this time.
Investment Point
The Chinese government's regulation of Alibaba, which was mainly known to us for Jack Ma's criticism of the Communist Party. A representative example was the failure of Ant Group's IPO. The fine was good at $984 million; Chinese banking authorities reportedly stated that there would be no further fines or regulatory actions. Ant Group gets ‘very manageable’ $984 million fine as China ends tech crackdown that thwarted world’s biggest IPO The IPO's failure was not only due to the superficial reason of missing the opportunity to inflow funds into Alibaba; Investors say that the Chinese authorities have been criticized (therefore, Alibaba will have no growth potential) It was a signal that made you believe, and from this point on, the stock price actually continued to decline. Now these issues have disappeared.
- Ant Group's resolution of fine issue Strictly speaking, it is not that the issue of fines has disappeared, but rather the resolution of uncertainty.
**Alibaba is conducting a buyback program worth $40 billion over 25 years. Considering Alibaba's market cap is 250 billion, a buyback of $40 billion is truly enormous. Activist investor Ryan Cohen acquires shares in Alibaba
- **Active in buying back shares
**Of course, I am someone who believes that undervaluation itself should never be a reason for investment. Nevertheless, Alibaba's value is not high. Forward PE is a whopping 10! Trailing PE is also 24.73, which is at the S&P500 level. For reference, in the case of Amazon, which has a business model similar to Alibaba, Trailing PE 320.67, Forward PE 85.47.
- **Underrated charm
Risk
**The conflict between the US and China is still one of the factors that should not be forgotten. Although the heated conflict between the US and China appears to be easing, such as the US's decoupling → de-risking and Secretary Yellen's visit to China, On the one hand, the [Enactment of the Foreign Relations Act] ( https://www.bbc.com/korean/articles/c06dmzjlrymo ), the exact contents of which are unknown, The movement to restrict the export of gallium and magnesium shows that the spark still remains. In addition, Alibaba is actively working on semiconductor independence with Tencent ( https://www.theregister.com/2022/12/01/alibabatencentchina_riscv/ ). The possibility of direct sanctions, such as sanctions against Huawei, cannot be completely ruled out.
- **Conflict between the US and China
**Many people expected a strong rebound in the Chinese economy after the pandemic, but The reality is not so easy. Of course, there are many cases that showed hope for a demand rebound, but Continued inflation and each country's austerity stance are leading to plans for full-scale expansion into Europe, etc.. This is somewhat of a concern for Alibaba in terms of performance.
- **Macro concerns
Concluding
I think this is the point where the expected return is higher compared to the risk. Even if the risk materializes, Alibaba is a company with little exposure to the United States. Not only is the actual damage limited, but The value of this company, which is continuously growing and is active in stock repurchases, is I wonder how much longer the decline can continue.
References
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Hana Investment 230712 Uncertainty resolved, entering upward phase
Alibaba on the Daishin Securities 220520 test Samsung Securities 230224 There is a time lag in the re-opening effect.