Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988) plans to create value to shareholders for the next ten years by riding these trends –
There are many reasons to be bullish on Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988).
The technology conglomerate is both super profitable and growing quite rapidly; Alibaba is also both gigantic and a well-run company.
Alibaba finds itself in its current position, not by luck. Management has smartly positioned the company to benefit from many current and future potential growth trends.
With this in mind, here are five huge secular trends that Alibaba is currently riding and which could benefit shareholders in future.
In the past 20 years, Alibaba has ridden the increasing development of Chinese e-commerce to a huge market cap.
As a result of the increasing development of e-commerce in China, Alibaba’s profits and sales have increased substantially.
In the next two decades, Alibaba could continue to benefit from the e-commerce trend with faster delivery speeds and more internationalisation of its strategy.
Faster delivery speeds could increase demand and more international users could increase Alibaba’s overall target market.
Autonomous driving will be a trillion-dollar market, and Alibaba will be there to benefit through its AMAP super mobility app, which can be used for ride hailing.
There’s also the potential of Alibaba Cloud, which can be used to store a lot of the data generated from self-driving vehicles. The company also has its own internal self-driving efforts.
Besides ride-hailing and cloud services, Alibaba can also benefit from autonomous driving in other ways.
If done correctly, autonomous vehicles can speed up delivery times (say for potentially heavy items that can’t be delivered via drones) and improve logistics efficiency. Demand generally increases if delivery times are shorter and more cost effective.
Continued growth in China’s cloud is a huge trend due to the cloud’s flexibility and potential cost-effectiveness.
With computing resources on demand, companies can spend more time building/improving their own products/services rather than spending valuable time managing datacenters. Given the scale in the cloud, many companies could potentially save money too.
As the leader in China’s cloud infrastructure services market, Alibaba’s cloud division will likely have a lot of growth left.
This year, Alibaba announced plans to invest US$28 billion (RMB 200 billion) in its cloud business over the next three years to help the business continue to grow and gain scale.
Online-to-offline local services
Although Meituan Dianping (SEHK: 3690) arguably gets more attention for its online-to-offline (O2O) local services business, Alibaba also has a leading O2O local services business in Ele.me.
As the market continues to expand and as technology develops to increase efficiency of delivery, Alibaba’s local services business could become more profitable (and valuable too).
Not to be left out, Alibaba also benefits from the fintech trend via its one-third ownership of Ant Financial.
According to recent reports, Ant could reportedly debut at a valuation of over US$200 billion. If the IPO goes well, Ant could be worth even more.
Alibaba is a great company that benefits from huge trends such as the continued development of e-commerce, autonomous driving, the cloud, online-to-offline local services, and fintech in China.
Due to those trends, Alibaba is still a great investment despite its outperformance in 2020.
- $10,000 Invested in These 5 Growth Stocks Could Make You a Fortune Over the Next Decade
- What Would Ant Financial’s Potential IPO Mean for Alibaba’s Investors?
- Is Jack Ma Buying or Selling Alibaba Shares?
- How Alibaba-Backed Ant Financial Dominates Its Market
- Chart of the Week: Are Alibaba Shares at the Start of a Bull Run?
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Jay Yao doesn’t own shares in any companies mentioned.
The Motley Fool Hong Kong Limited(www.fool.hk) 2020