The founders of Alibaba [NYSE: BABA] are not shy about setting goals. The company intends to lead the world in developing infrastructure for commerce in an increasingly global and digital economy.
More than that, Alibaba’s leaders have an eye on their long-term success. The business launched in 1999, and its founders boldly stated that Alibaba will be around for at least 102 years long enough to do businesses in three separate centuries.
Based on results thus far, the company appears to be well on-track to meet these goals.
In 20 years, Alibaba [NYSE: BABA] has grown from a small Chinese startup to a massive multinational conglomerate.
The original Alibaba.com concept connecting global buyers with wholesalers and manufacturers continues to bring in clients.
Shortly after the original service was launched, Alibaba created Taobao Marketplace a social commerce platform where individuals can sell items to each other.
Later, Alibaba added Tmall.com a B2C platform. Today, more than 190 countries are represented on the Alibaba, Taobao, and Tmall customer lists.
Alibaba also offers cloud computing solutions, as well as a division devoted to digital media and entertainment. Alibaba owns Youku, a streaming service similar to Netflix [NASDAQ: NFLX], and Alibaba Pictures.
A variety of additional initiatives are in the early stages, including a 33% stake in Ant Financial, which owns China’s number one mobile payment platform. This new venture gives Alibaba [NYSE: BABA] a greater ability to offer financial and payment services to the consumers and businesses served by its other divisions.
In June of 2018, Alibaba [NYSE: BABA] shares reached an all-time high of $211.70. However, just four months later those shares were down by almost a third.
Today, the stock still hasn’t fully recovered from its sudden decline. The massive sell-off wasn’t exclusive to Alibaba. Several major Chinese technology companies were affected, including Baidu [NASDAQ: BIDU] and Tencent.
The abrupt decline was prompted by what was widely perceived to be an escalating trade war between China and the United States. However, it is interesting to note that these businesses aren’t significantly affected by increased tariffs. Most of their revenue is generated through the Chinese marketplace, not the US.
Nonetheless, investors are nervous about Chinese investments in the current political climate.
While the tension between the two countries has relaxed considerably, many are still fearful that the economic relationship is unstable. For those who are comfortable with this risk, today’s low share prices could mean big bargains now and substantial profits later.
Stock prices are unpredictable, as any investor knows, and it is certainly possible that Alibaba shares won’t recover the 2018 losses. However, there are plenty of reasons to be optimistic that the company will reach its June 2018 high again, then go on to set new records.
Alibaba is growing, both online and offline, and this growth will continue with or without the United States.
Only 38% of China’s 1.4 billion people participate in e-commerce today. As online access and e-commerce opportunities reach more of the population, the country’s e-commerce market will expand.
Researchers estimate that the e-commerce market in China will grow from today’s $1.1 trillion to $1.8 trillion by 2022.
Since Alibaba [NYSE: BABA] commands more than 50% of the Chinese B2B and B2C e-commerce market today, it is well-positioned to facilitate a substantial share of the expected growth in coming years, whether or not its actual share of the marketplace grows
Alibaba [NYSE: BABA] is making strategic moves to grow its share of the offline marketplace, as well.
Under the heading “New Retail”, the company now operates Intime department stores and Hema supermarkets.
It has developed partnerships with a collection of other brick-and-mortar retailers, sharing its vast technological expertise in exchange for an investment stake in the smaller business.
So far, the “New Retail” initiatives have fallen into the “other revenue” category, which enjoyed a 344% year-over-year increase in the company’s fiscal 2019 first quarter.
As this portion of the business continues to expand, investors should watch financial statements for this part of the business to be carved out from “other revenue”.
Outside of China, Alibaba is making big moves to increase its presence in the international marketplace.
Because Alibaba’s mission is to develop the infrastructure for a global digital economy and create an online marketplace that connects businesses and consumers from every part of the world, new partnerships with international e-commerce initiatives make sense.
At the moment, Alibaba [NYSE: BABA] is focused on increasing its presence in the growing Southeast Asia market through a large investment in Singapore’s online mall, Lazada.
Alibaba has also launched a joint venture with Russia’s Mail.ru for an e-commerce platform that could transform the entire nation.
These efforts at international expansion are still young, but they are already driving considerable revenue. For the fiscal 2019 first quarter, Alibaba’s international commerce retail division reported a year-over-year revenue increase of 64%.
Overall, there is every reason to believe that Alibaba’s share price will rebound to June 2018’s high, then go on to eclipse previous all-time highs by setting new records. Though investors can’t get the stock at December 2018’s rock-bottom price of $129.77 per share, many analysts believe that today’s price is still a bargain.