Alibaba
Alibaba's fortunes have sagged starting in the fall of 2020 when the IPO of its Ant Financial unit was shelved over a dispute with regulators. This was the start of a multiyear ordeal that kicked off a punitive and aggressive crackdown from Chinese regulators to curb the aspirations and independence of Chinese tech companies which were growing increasingly large, powerful, and multinational.
Overall, Alibaba is down 71% from its high in October 2020, although this was a 77% loss at its nadir. The stock is extremely cheap by many measures especially relative to U.S. tech stocks. Currently, the company has nearly $70 billion in cash and remains a dominant leader in many growth categories like e-commerce, delivery, and cloud computing.
However, this is understandable as the stock has unusual amounts of political risk from the Chinese government and from an escalation of tensions between the U.S. and China. Another factor is the slowdown in the Chinese economy which has been exacerbated by an over-leveraged property market and aggressive lockdowns. Therefore, it's not surprising that these macro issues are overshadowing the company's actual operations.
In Q1, the company's earnings show that the company is doing relatively well in a difficult operating environment. It reported $1.55 in adjusted earnings per share which were higher than expectations of $1.07 per share. Revenue also beat at $32.2 billion vs $29.9 billion. This was a 9% increase from last year.
The company also announced that it would be increasing its share buyback to $25 billion which equates to about 10% of its market cap. This is an increase from its previously announced buyback of $15 billion. It's also a signal to investors that the company sees shares as being undervalued.
Looking ahead, Alibaba obviously has considerable upside if investors have a strong view on the political situation in China, between China and the U.S., and China's economic trajectory. Absent these factors, investors are better advised to focus on other parts of the market that are also beaten up but are less complicated.
