Traders Choice for the week 33. ALIBABA

What is it all about?

  • Alibaba once again showed great growth during the first quarter, and unlike its bigger rival Amazon, Alibaba is growing very profitably. Just like Amazon, its growth has been led by its e-commerce business, complemented by cloud services and to a lesser degree, digital entertainment and media.
  • Revenue in the quarter ended June 30 was reportedly $7.1 billion, up 56 percent over the same reporting period in 2016. Net income for the quarter came in at $2 billion.
  • Other segments driving revenue were cloud computing, which generated $359 million, up 96 percent over last year in the same quarter, and digital media and entertainment was up a more modest 30 percent to $602 million. The company said it is cutting back some on spending in that unit.

What does it mean for investors?

  • Being the dominant e-commerce company in China by far, what remains to be seen is how successfully it can compete on the international stage across its most important businesses.
  • Alibaba is active in the same industries as Amazon (cloud, online retail, digital entertainment), and has significantly higher growth rates in those areas. On the other hand, Alibaba's total revenues are a lot smaller than Amazon's total revenues, which makes it even more surprising that Alibaba is so much more profitable.
  • What should matter most for investors though is the performance of its e-commerce business and cloud computing, and in that regard, Alibaba is positioned for solid long-term growth.

What would be a good move?

  • Alibaba continues to grow the company in the right areas, with its cloud business expected to become a larger percentage of revenue, which means it should help to widen margins and boost earnings, as it has with Amazon.
  • Alibaba’s shares price continues to drive its all-time high now and nothing seems to stop it in the upcoming weeks. It’s a great option for short and long-term investors
  • Stay in touch with your Personal Market Analyst. He will help you to find the best entry point and maximize your profit on Alibaba