Alibaba (NYSE: BABA) stock price has been under intense pressure in the past few months as investors’ concerns about margins and China regulations remain. BABA is trading at $87, which is about 72% below its all-time high. As a result, the company’s market cap has crashed to about $235 billion.
Alibaba facing multiple challenges
Alibaba is one of the biggest companies in China. The firm operates in a number of industries, where it has a commanding market share.
For example, the company operates its flagship Alibaba website where people can buy products directly from sellers in China. It also owns TMall, which is a large third-party and mobile commerce company.
Its other large operations are Aliexpress, Youku, Alimama, and DingTalk. Like Amazon, the company has also diversified in the cloud computing industry, where it has a commanding market share.
Alibaba is a global giant that generates hundreds of billions of revenue every year. Similarly, it is one of the most profitable companies in the world.
The Alibaba stock price has declined for a number of reasons. First, like Amazon, the rising inflation has had an impact on demand. Second, the stronger US dollar has affected many of the company’s international customers, who are now paying more for the same products.
Third, and most importantly, there is the lingering fear that the company will be delisted in the US as tensions with China rise. Also, there are concerns that the world is moving away from globalization which helped it do well. Finally, Chinese regulators have launched a major crackdown on tech companies.
Why Alibaba stock is a bargain
While Alibaba faces many challenges, there are several reasons why the shares are a bargain. First, while competition in its industries is rising, the company has a commanding market share. As such, it will likely do well when these concerns settle.
Second the company is highly profitable. For example, in 2021, the company’s net income was more than $22.9 billion. In contrast, Amazon had a net income of over $33 billion. It is worth noting that Amazon is valued at over $1.5 trillion. Also, the full-year results included a one-off charge when the company paid a fine to Chinese regulators.
Third, with China’s economy slowing, there is a likelihood that authorities in Beijing will start going slow on tech companies. Also, there is a possibility that the company will not be delisted in the US. In other words, these challenges have created significant value in the company.
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