Why is Alibaba So Cheap?

Think the investments won't pay off?

Andrew Willis 18 June, 2021 | 4:28AM
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Andrew Willis: It’s hard to find tech giants that are undervalued, but with Alibaba we find one at a significant discount. But why?

Lately, the walls of regulatory risk have been closing in on big Chinese internet companies, including e-commerce giant, Alibaba. Are the days of these near-monopolies coming to an end?

Not if Alibaba can help it. This company can still secure the market share it’s managed to capture. It’s aggressively investing to help counter new weaknesses like the end of exclusivity agreements with merchants. Investments in things like merchant retention measures, user acquisition and improved logistics will bear fruit, according to senior equity analyst Chelsey Tam.

As a result of the spending, earnings may be flat for a while, but the company will continue to access unparalleled amounts of valuable data - for example, on ninety-one percent of the market with its Tmall website, while some investors continue to worry about a shrinking monopoly.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alibaba Group Holding Ltd ADR73.35 USD-3.08Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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