Chinese e-commerce giant Alibaba Group Holdings (HK:9988) (NYSE:BABA) is turning the tides in its favour making the right moves at the right time. Alibaba shares have lost over 15% in the past year owing to internal governance issues, intense competition, regulatory overhaul, and the sluggish recovery of the Chinese economy. However, Alibaba’s chairman and co-founder, Joe Tsai, is optimistic about the company’s turnaround. In a recent exclusive interview with CNBC, Tsai spoke about how Alibaba is well-placed to beat the competition despite the ongoing pressures, saying, “Now we’re back.”
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Alibaba Group offers numerous services, including e-commerce, retail, Internet, and technology, and is a market leader in most of them.
All Set to Turn its Fortunes
In the CNBC interview, Tsai said that Alibaba is turning its fortunes and gearing up for a period of potential high growth. Tsai expects the Chinese e-commerce penetration to surpass 40% in the next five years from the current 30%. While rivalry from cheaper online platforms persists, Alibaba is learning from the competition. For example, Alibaba is trying to rev up its sales from online streaming services, similar to peer Douyin.
Last year, Alibaba split the company into six strategic units with the aim to spin off and list them publicly. However, the first attempt at listing the Alibaba Cloud Intelligence Group unit hit a roadblock when the U.S. chip export ban put the unit’s future in jeopardy and investor sentiment in capital markets remained weak. The company has put aside the IPO plans for its units until the capital markets gain momentum.
Tsai acknowledged that Alibaba has not done as well in recent years as in the past but is ready to bounce back and feels “a lot more confident” about competing in the marketplace. In the meantime, Tsai and co-founder Jack Ma continue to buy Alibaba shares at depressed prices, displaying confidence in the company’s future potential.
Alibaba’s Focus on AI and Tech
Recently, Alibaba led a $1 billion funding round for Chinese artificial intelligence (AI) startup Moonshot AI. The investment is the largest one to date for a Chinese AI startup, boosting the company’s valuation to $2.5 billion.
Alibaba’s investment in Moonshot comes alongside investments by bigwigs Monolith Management, Meituan, and venture capital Hongshan. Moonshot’s generative AI chatbot Kimi, launched in November 2023, is poised to compete with the likes of OpenAI’s ChatGPT.
Meanwhile, a recent inquiry by the U.S. Securities and Exchange Commission (SEC) revealed that a majority of Alibaba is state-owned. Notably, more than 12 of Alibaba’s business units have either direct or indirect Chinese government ownership. Alibaba shares saw little momentum on this news, indicating that shareholders were not intrigued by the government ownership.
What is the Stock Prediction for Alibaba?
Analysts remain split on Alibaba’s stock trajectory owing to the several issues discussed above. With four Buys and two Hold recommendations, 9988 stock has a Moderate Buy consensus rating on TipRanks. The Alibaba Group Holdings share price target of HK$100.87 implies 36% upside potential from current levels.
Ending Thoughts
All has not been well at Alibaba in the past couple of years. Having said that, the management reshuffle and strategic turnaround of its units have ignited hopes of a gigantic comeback. Plus, Alibaba is making tactical investments in the AI space that may lead to better returns in the future. All these make for a strong turnaround story for the Chinese e-commerce giant and technology player.
