Alibaba market valuation

Over the past year, Alibaba’s share price has dropped by a staggering 44%. In the year of a global pandemic when shoppers were forced online and amidst a global boom in eCommerce, it is surprising as to why the company has shrunk at such a rate.

In comparison over the same period, eBay’s share price has grown by 43%, and whilst Amazon is slightly down, just before they announced they had missed their Q2 earnings expectations for 2021 they were up 6%.

Whilst eBay raised a few questions around their earnings call and there were a few questions around their buyers disappearing, Jamie Iannone has overseen a big push of consolidating the marketplace globally and filling out the eBay backend with a new suite of seller tools. Combine this with the new direction of higher value products and buyers for the first time in years it sounds like eBay has a clear direction in which they are heading, clearly adding to market confidence.

This leaves the question of Alibaba.

The Alibaba Decline

Often referred to as the Amazon of the East and the eCommerce and industry giant behind the Singles’ Day phenomena and a whole host of other string to their bow much like Amazon, it begs the question how has their market value almost halved in just a year?

One of the largest contributors was likely when the Chinese government hit Alibaba with a record-breaking fine of $2.7 billion due to alleged monopoly abuses and market dominance practices back in April. There have also recently been accusations of sexual assault allegations and people being fired internally causing more bad press for the company.

The most interesting thing regarding the Alibaba market valuation however is that the company is continuing to grow at an exponential rate.

alibaba stats

What this shows that would not be apparent from looking purely at market value is that Alibaba is continuing to grow as you would expect in terms of global eCommerce growth. Instead what we are seeing from the market value is investors’ distrust of the Chinese government.

This causes problems for Alibaba as they have such a diversified portfolio including things like AliPay, Alibaba Cloud, and Alibaba Health. The Chinese government has a history of changing the regulations and rules around private ownership and monopolies in the space which is the problem Alibaba is facing.

Independent market analysts are often of the same opinion that as it stands right now Alibaba is massively undervalued on the market. But investors are so uncertain of what the Chinese government could do next that would impact Alibaba it is keeping them away from the company.

It seems like the market is on the precipice of either continuing a fall, or ready to bounce back to get back to its true valuation. Only time will tell.

I want to say a special thanks to Tim Davies, Managing Director at Zellis Connect who first brought this to my attention and inspired this post.

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