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That shift, along with its big investments in its unprofitable cloud business and obligatory investments in China's "common prosperity" measures, will likely throttle Alibaba's earnings growth as its revenue growth slows down.WeChat is one of the most popular free messaging apps in China and provides many features compared to other social messaging apps, such as Facebook Messenger. Lastly, Alibaba is increasingly depending on its lower-margin brick-and-mortar, direct sales, cross-border, and logistics units to mask the slower growth of its core online marketplaces. Second, China's actions against Alibaba, especially its bans on exclusive deals with merchants and promotional pricing strategies, could erode Taobao's and Tmall's defenses against JD, Pinduoduo, and other e-commerce competitors. The elimination of barriers between those two platforms, which hold a near-duopoly in China's digital payments market, might be good for businesses consumers, but it also prevents Alibaba and Tencent from locking those merchants and shoppers into their ecosystems.
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The regulators also forced Ant to open up its Alipay payment platform to Tencent's WeChat Pay and vice versa. But later that month, the Chinese government forced Alibaba to sell its stake in a state-backed media broadcaster at a steep loss, then moved to break up its fintech affiliate, Ant Group (in which it owns a 33% stake in), into three separate companies. In early September, Alibaba pledged to invest about $15.5 billion in China's "common prosperity" initiatives over the next five years, presumably to appease the antitrust regulators. Why Alibaba isn't a worthy long-term investment yetĪlibaba might look tempting to investors who believe the regulatory tensions will ease, but I'm still staying bearish on the stock for three reasons.įirst, China's crackdown on Alibaba and its affiliates is far from over. That stabilization could be short-lived, but it could generate short-term gains for Alibaba as investors cautiously revisit the stock. A broader recovery in Chinese tech stocksĬhina's ongoing crackdown on its top tech companies, escalating political tensions between China and the United States, delisting threats for U.S-listed Chinese stocks, as well as potential property and energy crises in China have all made it painful to invest in Chinese tech companies.īut after a challenging September, many Chinese stocks stabilized in early October as concerns about the property market slightly receded and analysts expressed optimism about the upcoming virtual summit between American President Joe Biden and Chinese President Xi Jinping. That depressed valuation, which is much lower than competitor JD's forward P/E ratio of 37, indicates it could quickly rebound if those regulatory headwinds fade. It also represents a major vote of confidence for the company following Munger's controversial interview on CNBC back in June, during which he praised China's financial regulators and said they did the "right thing" in reining in the planned IPO of Ant Group, an Alibaba affiliate.Īs a result, Alibaba's stock trades at just 14 times forward earnings. That big purchase makes Alibaba one of Daily Journal's largest investments, alongside Bank of America and Wells Fargo. Daily Journal bought 136,740 shares of Alibaba and raised its total stake to 302,060 shares, which is worth about $47 million today. 5, Berkshire Hathaway Vice Chairman Charlie Munger's Daily Journal Corporation ( NASDAQ:DJCO) revealed that it had increased its position in Alibaba by 82% since July. Does that buzz indicate the Chinese tech giant, which has lost nearly half its value over the past 12 months, is finally primed for a fierce rebound? Let's see why investors are getting excited about Alibaba again. Alibaba ( NYSE:BABA) became one of the most talked about tech stocks on Reddit's WallStreetBets subreddit in early October, according to the latest data from Quiver Quantitative.