Is Alibaba the ultimate gorilla?This last quarter, revenue was 14 billion USD, growing at 51%Cloud growing at 76% now at 1.12 billion USDSo, in most of the Western world, we have laws and regulations against anti-competition. Namely, becoming a monopoly. Of course, if you're a business, this is precisely what you want. You want to get economies of scale and you want to sell something that your customers have to have, so you have pricing power.So we have these laws so any one business cannot become too powerful and start shafting the market by raising prices higher and higher after having taken out all their competition/stifling further competition.This is the worry regarding Amazon. Although, arguably, they've done a great job at dropping prices for all of us and bringing in the era of cloud computing. For the time being, they've been a bonus for the consumer. And yet there is big talks about forcing them to spin out.SaintCroix over at Saul's mentioned he believes AWS hasn't been fully valued into Amazon's share price. After thinking about it, and given the current IPO market, I agree with him. So on a sidenote, investing in Amazon now may be like investing in at the IPO price of some of the recent darlings like ZM, PD, and soon to be Slack. IF, and yes i know it's a big if, AWS is spun out, it will be fully valued as a tech company in hyper-growth. Revenue of 25 billion for 2018 (we're now almost half-way through 2019). At a P/s of 30, that's a 750 billion company. At 45% growth. Maybe worth a punt in amazon?Okay, back to Alibaba.Biggest company in China, and as they do with all their public companies, they essentially own part of it. So they are happy for Alibaba to grow unchecked. True economies of scale and value-add ecosystem will make alibaba worth a lot more to the Chinese Citizens. I would imagine the government will prevent the company from abusing the consumers. But they will be happy for them to acquire any competition to strengthen their stranglehold of the market.They're worth 500 billion USD and have free reign of the largest? (or at least the most # of people) market in the world, which is largely restricted from outsiders. And they have their fingers in lots of things.Cloud computingE-commerceGaming and EntertainmentFintech - largest in China although admittedly WeChat probably has the bigger momentumAlso invested into India, another potential boom, with Paytm - an indian fintech play.A lot of things going for them. My question is, do they have an advantage because they are a Chinese company, by being allowed to become a real Gorilla, whereas in western markets, regulations don't like corporations getting too powerful. This is to protect us, the consumer. But the Chinese government knows best for their people, of course.....:)
The flip side is the Chinese government does not have to go through any legal proceeding if they want to break them up. They can just do it. And as a shareholder, they can just spin off the businesses and not give you any ownership of them because you basically have no shareholder rights. And who knows how cooked those numbers are anyway? It might be the big gorilla. I'm just not sure if we can truly buy a piece of it.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |