Investment Ideas

Alibaba: Despite Big Risks, Cloud Growth Makes Valuation Interesting

Alibaba (BABA), often referred to as “the Amazon (AMZN) of China,” is the country’s largest e-commerce, cloud, and digital advertising company. Its e-commerce business has been the growth and profit engine for years, but cloud computing is positioned to increasingly contribute meaningfully to high-margin growth in the future. The perception of weak corporate governance, combined with geopolitical tensions, are major risks, and November could be a big month considering the US election, the company’s upcoming earnings announcement, and Singles’ Day. In this article, we analyze Alibaba’s business model, its market opportunities, fundamentals, valuation, risks, and finally conclude with our opinion on whether the stock offers an attractive balance between risks and rewards.