Is It Time To Book Profits In Alibaba Group Holding Ltd (BABA)?


Alibaba Group Holding Ltd (NYSE:BABA) has made a stunning debut on U.S markets this September. The company’s stock has risen by more than 20% since then. The company has a market cap of 276.65 billion, higher than U.S. rivals like Facebook Inc. (NASDAQ:FB) and Inc. (NASDAQ:AMZN). The company faces tough expectations from investors going forward to advance.

The Chinese e-commerce giant is in the process of transitioning businesses to mobile, but the transition appears to be challenging for the company. The company, which has commanded the attention of almost everyone because of its high margins of over 40% is now fighting to maintain them.

Mobile Apps

As per preliminary analysis, Alibaba Group Holding Ltd (NYSE:BABA)’s progress so far on the mobile front is promising. The number of active users for the company’s mobile app rose from 136 million in December to 188 million in June. Further, the April to June quarter reported a third of the company’s total transactions on mobile, which is heartening at this moment.

However, Alibaba Group Holding Ltd (NYSE:BABA) has itself admitted in its IPO filing about the complexities of transitioning from PC to mobile. The company makes its revenues through ads and commission fees from merchants on its Tmall and Taobao sites.

What Will Help Alibaba?

The rally in Alibaba Group Holding Ltd (NYSE:BABA) has raised some doubt with regard to its valuation. Maybe Alibaba appears overvalued but it still has a long runway for growth, based on the markets it caters to. The company currently has 307 million active users which when compared to 600 million China’s internet users  point to potential opportunity for the Chinese Giant.

Further, the company still has to explore its potential in the U.S. market, where 82% of the consumer’s access internet. Moreover, Alibaba is not sitting quiet with just business model in its portfolio but has stakes in multiple businesses such as hotel, tech companies, video companies, soccer clubs, and travel websites. Thus, it should justify that Alibaba Group Holding Ltd (NYSE:BABA) is still a threat to its rivals and a very unique business with a unique leader.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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