Be kinde to folk. This changeth the whole habitat.
- Manlobbi
Halls of Shrewd'm / Shrewdsmith
No. of Recommendations: 3
It's been a rough two years for Alibaba. November 2020, the Chinese government canceled the IPO of Ant Financial, triggering the start of a long decline in share price from its Oct 2020 high of $317 to ~$63 Oct 2022. The government followed up with a hefty fine on Alibaba in April 2021 for monopolistic behavior, and a mandate that the company re-orient its business practices to more benefit the population. Covid lockdowns and supply shortages contributed to a big slowdown in sales growth and a big decline in GAAP income.
Perhaps the clouds are clearing, though, and robust growth will resume? China abruptly reversed its Zero Covid policy, so that drag on the economy should be somewhat in the past, though ongoing spread of the actual disease could continue to disrupt the Chinese economy this year. There have been various news reports over the last year that the government is warming back up to Alibaba, and there's more news today:
https://finance.yahoo.com/news/alibaba-signs-coope...[BABA] has signed a cooperation agreement with the government of Hangzhou, the city where the company is headquartered ... at the signing event, local authorities formulated specific measures to help develop the online platform economy...
On Monday, Guo Shuqing, Communist party chief of the People's Bank of China, was quoted by state broadcaster CCTV as saying that rectification of the financial business of 14 online platform companies has been "basically completed," though he did not name any companies.
Also, in BABA related news, Jack Ma is releasing control of Ant Financial, which may be good for prospects of a future IPO.
No. of Recommendations: 1
Great posts BenSolar. Alibaba has risen 80% since its low.
Investors tend to get too pessimistic.
It will be very interesting to see how their changing stance on earnings preservation will start to show up in real figures over the next two or three quarters. I don't greatly care, as their cash flows are fine and they really do need to fight competition right now, however Wall St does care so it will effect the quote over 2023.
- Manlobbi
No. of Recommendations: 2
Alibaba has risen 80% since its low.
Another 70% and I'll be back to break-even on my investment, lol.
It will be very interesting to see how their changing stance on earnings preservation will start to show up in real figures over the next two or three quarters. I don't greatly care, as their cash flows are fine and they really do need to fight competition right now, however Wall St does care so it will effect the quote over 2023.
They've continued to be a profitable business, and to flow tons of cash despite the headwinds mentioned in my OP and despite re-investing heavily in the business to fight the competition. Top line sales growth has slowed a fair bit, though, from ~40% 2020 to 2021 to ~19% 2021 to 2022, and negligible growth the first two quarters of this fiscal year compared to the same quarters the prior year.
I have some faith that the change in macro environment and easing governmental oversight will allow them to resume robust growth, but macro headwinds continue this year to some extent.
What kind of sales growth do you anticipate over the next 10 years, for your pessimistic forecast, per the Manlobbi Method?
No. of Recommendations: 3
My average is c140-150 happy to hold and let it recover. The whole experience has put me off investing in China though. I'm just going to stick to the US and be more like Buffett than Munger!
No. of Recommendations: 3
I'm finally in the black after buying the dips. I know have a 3% position and will hold.
No. of Recommendations: 0
*now*
No. of Recommendations: 1
No. of Recommendations: 0
And the latest "Golden Shares" and a seat on the Board.......it's never ending.
No. of Recommendations: 1
Also affects Tencent. On the BRK board I mentioned I had Prosus (Tencent) which I sold out of with a reasonable gain and have shifted the majority of the funds back Stateside into Google.
I love the China story and think it's where the growth should be, however struggle to get a grip of uncertainty, outlook and therefore valuations.
Does the CCP taking a direct stake lead to lower future valuation multiples for example. In an article which discussed Bytedance it said they'd have influence over pay, hiring, capital allocation and strategy with their seat on the Board....
This could potentially kill off growth and innovation for BABA and Tencent and just make them cash cows for the CCP.
No. of Recommendations: 4
"And the latest "Golden Shares" and a seat on the Board.......it's never ending."
This is an example where one needs to decipher the fact from the fine prints in western reports and draw your own conclusion. The fact is there is an investment fund or a business, which is majority owned by the government, that has invested about 1% in a tiny subsidiary of BABA or Tencent. Does that mean the government has taken control of BABA or Tencent as the western reports implied? Or is it a pure investment decision where the government plays no role?
No. of Recommendations: 0
Good point. I've undertaken further research reading many more sources and agree.
