Ali Baba: Favorable Retail Sales Data Vs Moderated Stimulus Impacts (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• Chinese Retail Sales growth data is a leading macroeconomic indicator of Alibaba's domestic ecommerce business. Oct 2024's reading suggests upside potential in Q3 FY25.
• The integration of ecommerce businesses into one reporting unit will lead to lower visibility of individual domestic vs international drivers of revenue and margins.
• At a 1-yr fwd PE of 9.4x, Alibaba is fairly valued vs Chinese comps.
• Relative technicals vs the S&P500 are bearish but sellers are losing steam, increasing chances of upside and hence outperformance.
• I overestimated the impact of Chinese fiscal stimulus measures on BABA stock. In reality, it looks like the stimulus does not benefit businesses or household consumption as much, which is what matters most for Alibaba's fundamentals.

Read the full article here.