📈Alibaba ($BABA) | The Obvious Multi-Bagger No One Wants to Touch

Full analysis of Alibaba as a business and investment opportunity.

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I’m Kyler and welcome to Value Investing Blueprint this is a 🔒subscriber-only edition🔒.

Imagine stumbling upon a gold bar that everyone’s ignoring—that's Alibaba. It’s cash-rich, poised for growth, and undervalued. In this article, I’ll explore Alibaba’s operations, tackle common concerns, and share my 5-year outlook on this hidden gem.

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Summary of Businesses

Alibaba is a massive company with major brands in China and beyond. Before investing, you need to understand the business fully—imagine you’re buying the entire company.

1. Commerce and Wholesale (52% of Revenue)

Through Taobao, Tmall, and Alibaba International Commerce—including AliExpress and Lazada—Alibaba provides a vast online marketplace for products both in China and globally. They handle general merchandise and groceries at a scale that surpasses even Amazon in terms of gross merchandise value (GMV), reflecting the total sales value of all merchandise sold.

2. Logistics and Supply Chain Management (8.3% of Revenue)

Alibaba provides global logistics and supply chain services through Cainiao. They offer full-scale solutions that are easy to use and adaptable across various industries.

3. Cloud (11.1% of Revenue)

Alibaba Cloud offers a comprehensive suite of services, including servers, computing, storage, networking, security, databases, big data, and machine learning. With a 40% market share in China, Alibaba Cloud is the dominant player in the country's cloud industry.

4. Others (28.6% of Revenue)

Alibaba's revenue streams span across media (shows and movies), on-demand delivery (food and merchandise), healthcare services, and gaming.

Industry Forecasts

Forecasting Alibaba's growth is complex due to its diverse businesses. I'll simplify by focusing on three main segments: commerce and wholesale, cloud, and logistics, while grouping other areas together.

I’ll provide a rough estimate of the overall business value, acknowledging that precise predictions are challenging, so setting reasonable expectations and using conservative estimates is key.

1. Commerce and wholesale

This division has seen slow growth in China but rapid international expansion. For the 2024 fiscal year, Taobao and Tmall grew 5%, while Alibaba International Commerce grew 46%. Given the 11.6% average e-commerce growth forecast for China, I'll conservatively project 8% growth for both China and international commerce and wholesale revenues.

2. Cloud

Alibaba's cloud growth has slowed recently due to cutting unprofitable customers. However, growth is expected to improve once this cleanup is complete. For now, I’ll base my estimate on a 20.5% average growth forecast, but I’ll conservatively project 10% growth for Alibaba’s cloud business.

3. Logistics

Alibaba’s logistics growth has been robust, with a 28% increase in the 2024 fiscal year. The average global industry forecast is 19.9%. To be conservative, I’ll project a 12% growth rate for Alibaba’s logistics business.

Alibaba has strong growth potential, even with conservative estimates. For all other revenue streams, I’ll use a 5% growth rate, aligning with expected GDP growth.