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Like Steve Jobs of Apple or Jeff Bezos of Amazon, everyone in China knows Jack Ma, the founder and chairman of Chinese online retailer Alibaba (BABA). Global e-commerce is a land of giants. Among giants, Alibaba is the Goliath. A whopping $700 billion in merchandise was sold in Alibaba online markets in 2018. Under Ma’s leadership, Alibaba has enjoyed revenue growth of 47% over the last five years, double that of the global e-commerce markets. But as the Chinese economy slows, we have to ask, what will happen to the large retail business that Jack built once he retires this year?
If you want to invest in China as its middle class grows and spends more in online shops, this guide will help you evaluate the future growth opportunities of Alibaba stock, how to buy Alibaba stock, and the best Alibaba stock brokers.
Should you invest in Alibaba?
Alibaba sales hit $250 billion in 2018 – an amount equal to the entire economic output of Hong Kong. If you buy Alibaba stock, or invest in Tencent stock or shares of other Chinese e-commerce plays, you are investing in the tremendous growth in wealth of the Chinese middle class. Five hundred million Chinese shopped in Alibaba’s Taobao (consumer-to-consumer) and Tmall (business-to-consumer) marketplaces last year. But of greater interest to investors is the number of Chinese who do not shop online. Only 15 percent of 1.4 billion Chinese shop online. The other 85% could be future customers of Alibaba.
With so many new consumers ready to open their wallets, it may not matter that the Chinese economy is not expected to grow at the same fast clip of 13 percent logged over the last decade but a still impressive 9–10 percent. In 2018, the amount consumers spent on Tmall increased 29 percent. So before you invest in BABA, you need to know if Alibaba can still make money after it processes, packages and ships the products bought from its online shops. Let’s take a closer look at this e-commerce growth story.
Pros to buying Alibaba stock
Digitization is boosting profits
Alibaba has made a smart move by buying the businesses that process and ship the e-commerce purchases on its retail shops. Imagine a lego-world with an Amazon (Alibaba.com) to sell the products, a PayPal (Alipay/Ant Financial)) to pay for the products and a FedEx (Cainiao) to ship the products – this is the Alibaba digital economy. By automating these businesses, Alibaba is making more money by boosting productivity and reducing operating expenses. Alibaba is also digitizing sales and merchandising at the supermarket chains and shopping clubs it owns. The Chinese, who still prefer to shop at stores, buy 3 to 5 times more items at Alibaba-owned stores. Amazon, meanwhile, has only recently started buying stores hoping it will boost sales and Amazon stock.
A smarter small business ecosystem
Digitization is helping Alibaba fulfill Jack Ma’s original vision of giving small businesses the tools and market power to compete with large companies. Walk into Alibaba’s logistics business Cainiao and you will see smart robots packaging orders and sending them out for delivery. Alibaba owns 47 percent of this business. Contact a seller and you may have a conversation with a robot. Chatbots are learning how to answer customer questions and solve their problems. Investors who buy Amazon stock were worried about Amazon’s low China market share, not Alibaba on Amazon’s home turf. Alibaba is now wooing US small businesses to join its e-commerce platform and sell to its 1.4 billion users.
Alipay is China’s favourite digital wallet
Most purchases on Alibaba are paid for via Alipay, a separate company spun off from Alibaba with plans to do an IPO. Alipay has 700 million active Chinese users, whose bank accounts are linked to the service. Apple recently announced it was providing free loans to Chinese consumers to buy iPhones to rebound from a Chinese sales and Apple stock decline. Alipay is the lucky lender chosen to finance those iPhone loans.
China’s growing middle class is spending more
Here are more stats on the tremendous consumer spending power you’ll be investing in when you buy Alibaba stock. By 2030, China’s middle class will grow from 300 million to 850 million. Over the past decade, the middle class has tripled their retail purchases to $3.1 trillion. Alibaba captures 8 percent of these retail sales. The majority of its 636 million customers are consumers born after 1990 – the wealthiest consumer segment.
Cons to buying Alibaba stock
Chinese government meddling
The heavy hand of China’s centrally controlled government still meddles in the affairs of businesses and consumers. Some of these actions are good for Alibaba. The government is making it harder for the Chinese to spend money outside of the country. These restrictions are favourable to China’s largest retailer. Alibaba is not so happy with other recent changes. The Chinese central bank has placed new restrictions on customer funds and mobile payments. These moves reduce the fees retailers can collect. Tencent stock, the world’s largest online games company, was hit even harder when China held up games approval for months to screen for violence.
Founder Jack Ma’s departure
Although the new leadership may come under more scrutiny, it is business as usual at Alibaba. CEO Daniel Zhang, who will replace Ma as chairman, has been running operations for a long time. He is responsible for the successful logistics, offline grocery shopping and Taobao Marketplace businesses.
China’s retail sales hit a 15-year low in 2018. Some blame the US-China trade war, which will eventually have to be resolved for the good of both economies. The Chinese government is giving tax breaks to low income groups and businesses to stimulate consumer and business spending. Meanwhile, Alibaba has landed on the US counterfeit products blacklist for the second year in a row. In 2017, Alibaba shut down 240,000 shops for making fake products. Alibaba is working with luxury brands to combat counterfeiters through the Alibaba Anti-counterfeiting Alliance (AACA).
Alibaba Stock: Current Prices and Summary
With a gigantic market cap of almost half a billion dollars, Alibaba stock can influence the e-commerce and wider technology market. Likewise, Alibaba’s stock price is also influenced by the news of other large e-commerce stocks. Alibaba trades as part of a Chinese tech triumvirate called BAT (Baidu (BADU), Alibaba, Tencent (TCEHY)). In the first two months of 2019, Alibaba and Tencent stock prices were up almost 15 percent while Baidu was down more than 5 percent. So is it a good time to invest in Baidu stock? Before you invest in Alibaba stock, you want to know whether its shares are fairly valued. Before you buy tech stocks, you want to know if they are undervalued or overvalued. Below is the current price you can buy Alibaba stock at, but what about the future value of the stock? If we compare the current stock price to the forecasted future earnings of the company, we can get a glimpse into the future value of Alibaba. Alibaba has a forward price-to-earnings ratio of 27 versus 32 for Tencent and 17 for Baidu. The forward PE of Amazon, on the other hand, is much higher at 57. When compared to the stock of its peers, Alibaba stock appears to be fairly valued. Whereas a purchase of Tencent stock at current prices could be too expensive.
BABA price quote
|Price||$ 170.93||Daily high||$ 171.44|
|+ / -%||00:30%||Day before||$ 170.42|
Best Alibaba Stock brokers
|Spreads||• Spreads from 2 pips • Flat fee on withdrawal||•Fees are built into spread. • Spread cost : 0.35 • Unregulated broker||• Spreads from 2 pips||•Fees are built into spread. • Spread cost : 2 pips|
|Number of stocks available||4,000||2,500||1,500||N/A|
||Visit Broker||Visit Broker||Visit Broker|
How to Buy Alibaba Stock – Tutorial
How to buy Alibaba stock on eToro
eToro is the most popular social trading platform. The broker has established itself as a reputable and trusted trading platform among traders since it launched in 2007. The leading online broker for copy trading is regulated in several jurisdictions, including by the UK’s Financial Conduct Authority (FCA). Popular features include one-click trade and portfolio copying and social feeds. When deciding whether to buy Alibaba shares on eToro, consider these pros and cons:
- Fast account opening process
- CopyTrader™ platform
- CopyPortfolios™ across an investment theme
- One-click trade execution
- Low fees
- Low minimum deposit (200 euros)
- Range of payment methods
- User-friendly interface
- Full BCH trading
- Withdrawals can be slow
- Mostly CFDs
Start trading Alibaba stock on eToro
Step 1: Register your account
Fill out your basic profile information. To determine your investor risk profile, you will be asked to answer a few short questions about your investment experience, knowledge and strategy, as well as your risk-return level.
Step 2: Verify your identity
Attach and submit proof of identity for verification. US-based accounts are not accepted.
Step 3: Fund your account
eToro provides a wide variety of payment methods. Check to see if your preferred method is available in your country.
Step 4: Trade Alibaba stock
On eToro, you can invest in Alibaba through traditional securities trading and social investing. eToro assigns the portfolio of every trader a risk score based on the volatility – average daily price movement – of the instruments invested in on a scale of 1–6, 6 representing the highest risk. Here are three ways to invest in Alibaba stock on the leading social trading platform.
Step 4A: Place an Alibaba stock trade
To buy Alibaba shares, click on Trade. Select the Market (current price) or other price level you want to enter the market at. Enter the amount you want to trade and leverage (X1, X2, X5). Your Stop Loss and Take Profit levels are preset by you. You can also set up a One Click Trade option and preset the above parameters. The Alibaba stock profile page provides social feeds, stats, charts and research. Social feeds often provide helpful technical analysis tips and updates on how a stock is trading relative to its peers.
Step 4B: Place a CopyTrader™ trade
Choose from the selection of copy traders by reviewing their risk score, trading performance stats, charts, and portfolio. Check out the traders on the Editor’s Choice list. Click Copy. From the copy trade box, choose the amount you want to trade and the copy trade stop limit. Press Copy.
Step 4C: Place a CopyPortfolios™ trade
Choose a portfolio among dozens of investment themes. CopyPortfolios™ copies multiple portfolios and traders following that theme. We chose the NASDAQ100 theme portfolio, which has a high Risk Score of 6, as an example. You will want to choose a portfolio that holds Alibaba stock – an e-commerce or China theme, for example.
Review the risk profile and portfolio performance. Click on Invest. From the Invest box, choose the amount you want to invest and the stop investing limit.
How to buy Alibaba stock on Markets.com
The official online broker of the Arsenal Football Club provides all the basic tools and education a retail trader requires. markets.com is owned by Playtech, a public company listed on the London Stock Exchange. Like its PlaytechOne one wallet – one account solution for playing on casino, poker, sports and other gaming sites – for investors, markets.com seeks to provide quick and easy access to a good range of investment products. When deciding whether to buy Alibaba shares on markets.com, consider these pros and cons.
- Day traders
- Demo account
- Low commissions
- Good quality news flow
- Good set of analytical tools
- Limited order types
- Not many deposit options
- Customer services not very effective
- Unregulated broker
Start trading Alibaba stock on markets.com
Step 1: Register your account
You will be prompted to download the markets.com mobile app to register. After filling in basic profile information, a brief questionnaire on investment experience and knowledge, as well as income and assets, will determine your trading level and leverage. 1:30 is the leverage for the average retail investor. So with a $500 deposit, you can trade up to $15,000.
Step 2: Fund your account
If depositing by credit card, you will need to first have it verified. Click on Verify Credit Card on the My Account Page.
Step 3: Verify your identity
Attach and submit proof of identity and a utility bill for verification. Residents of the USA, Canada, Australia, Hong Kong, Japan and some other countries are restricted.
Step 4: Trade Alibaba stock
On Markets.com, you can choose to invest in Alibaba shares, or a wide range of ETFs and indexes with exposure to major technology stocks. Other securities include forex, cryptocurrencies (a handful of majors), bonds, blends, and grey markets in Uber and Lyft ahead of their IPOs. Trending Now displays a list of top moving stocks.
The Alibaba stock profile provides basic stock price charting information and a market sentiment indicator. Place the trade by choosing the Buy or Sell button.
How to Buy/Sell Alibaba CFD Stock on Plus500
Novice retail traders may find this platform lacks the trading interface, research tools and education they depend on for general guidance. The experienced trader with their own tools, stock data and news will be at home with the simple, intuitive interface and over 100 technical indicators. Traders who qualify for a professional account (with a minimum portfolio value of €500k) can raise their leverage levels, for example, from 1:5 to 1:20 for stock trades. When deciding whether to trade Alibaba CFD shares on Plus500, consider these pros and cons.
- FCA regulated
- Listed on the LSE
- Easy to use platform
- Great mobile platform
- High order volume
- Experienced traders only (no fundamental data)
- Only CFD trading
- High financing rates
- No scalping allowed
Start trading Alibaba CFD stock on Plus500
Step 1: Register your account
Firstly, click here to open your account. You will be prompted to download the Plus500.com mobile app to register. Select between a Demo and Real Money account. After filling in basic personal information, you will gain access to the unlimited demo account. Before you can trade Alibaba CFD stock, you will be prompted to answer a few questions to establish your investor risk profile.
Step 2: Fund your account
When you are ready to trade with real money, fund your account. Three payment options are provided. You may be asked to verify your payment method.
Step 3: Verify your identity
Attach and submit proof of identity for verification.
Step 4: Trade Alibaba CFD stock
Plus500 offers a wide variety of CFDs on investment instruments, including stocks, ETFs, indexes, forex and cryptocurrencies. Options are also available for the advanced investor. Query Alibaba and the price quotes for the stock, as well as put and call options, appear on the screen.
All stock information and the Buy/Sell commands are displayed on the general stock page for the serious trader who wants to execute quickly. The bottom half of the page displays the price chart and provides access to a broad selection of technical analysis indicators.
80.6% of retail CFD accounts lose money
A Brief Overview of the History of Alibaba
Jack Ma, the founder of the world’s largest internet business, used the internet for the first time in 1995 – the same year Yahoo! was founded. Though some believe Alibaba copied, Amazon was formed around the same time, 1994. In 1999, the former English teacher established Alibaba with 17 other founding partners from his apartment in China. The mission was to develop an internet portal to support small business. Alibaba.com remains a business-to-business e-commerce site but today not only hosts exporters, manufacturers and entrepreneurs from China but many other countries as well. Tmall the business-to-consumer market was started to provide a way for overseas Chinese to buy from Chinese businesses. Taobao is the consumer-to-consumer site and a top 10 visited site globally with 617 million active users. Cloud computing, and digital media and entertainment businesses were added. Alibaba continued to grow through. Alibaba owns a 33% stake in Ant Financial.
In 2005, Yahoo paid $1 billion for a 40 percent stake in Alibaba. The company went public in the world’s largest IPO in September 2014 raising $25 billion. Yahoo! made $10 billion in the IPO. In January 2018, Alibaba stock passed the $500 million market cap. Meanwhile, Yahoo!’s search business was sold to Verizon in 2017. The Alibaba stake was transferred to Altaba (AABA), an investment company controlled by Yahoo! cofounders Jerry Yang and David Filo, which today holds a 16.3 percent stake in Alibaba. In 2017, Alibaba became the official sponsor of the Olympic Games until 2028. In the cloud business, Alibaba competes with Amazon and Microsoft.
In 2020, Jack Ma will no longer be at the helm of Alibaba. The former teacher will be focussing on his education initiatives and most likely relaxing at his wine chateaus in Bordeaux in the south of France. Ma says it will be business as usual as he has left his retail house “built on systems of organizational excellence and a culture of talent development.”
What’s ahead for Alibaba stock during the leadership transition? You would have lost a lot of money if you chose to not buy Apple stock after Steve Jobs or invest in Microsoft without Bill Gates. Since these iconic leaders left, these stocks have tripled and quadrupled, respectively.
2019 – The billionaire-dollar-a-minute business
China retail sales are forecasted to grow at a rate of about 9 percent in 2019 and 2020. Alibaba has revised its 2019 sales forecasts downwards from 60 to 50 percent growth. The Chinese government tax breaks to low income groups and businesses should start stimulating consumer and business spending by the end of 2019. Alibaba’s recent annual online shopping event revealed the pent up consumer demand behind rising incomes. Chinese consumers spent $1 billion in the first minute. We forgot to mention Alibaba Pictures, which behind the e-commerce scene has has been coproducing movies with the likes of DreamWorks and Paramount Pictures. This year’s Oscar winner GreenBook was co-financed by Alibaba Pictures. It is hitting the box offices now and is sure to be a blockbuster. Expect other movie hits to follow. If you invest in Disney stock, Alibaba could spin off its film business one day. The average 2019 forecast for BABA stock is $1360, with an estimate of $830 on the low end and $1,900 on the high end. Though some analysts expect Alibaba stock to climb back up to its all time high above 2000 surpassed in June 2018.
2020 – On the cloud
2020 will be the first year without Jack Ma running Alibaba since its founding in 1999. Alibaba expects to turn over $1 trillion in gross merchandise value this year, about double 2017 turnover. The cloud business will become an increasingly stronger contributor to revenues. In 2018, cloud services grew 84 percent to $6.6 billion. Also keep an eye out for Alipay’s expected IPO – no date has been announced. Alipay now has one billion active users. The IPO will be a windfall for Alibaba, which has a one-third stake. And who knows, Ali Entertainment may have a few more movie blockbusters in production.
2021 – Borderless business
The economic slowdown forecasted for 2021–2022 will be a good time to buy tech stocks on the cheap. Alibaba will benefit from the rising GDP of the Southeast Asian developing economies where 20 percent of its global active buyers reside. International sales could grow from 8% of revenues to 20% over the next five years. Low-to-median growth is forecasted for BABA stock.
2022 – Digitization
Alibaba says e-commerce is growing at 20-30 percent because of digitization. Over the last five years, revenues have grown 48 percent but jumped 58 percent to $250 billion in 2018. Operating margins, though, were squeezed 2.5 percent. Alibaba’s plan is to make those robots and other automation tools work harder to boost productivity. CEO Zhang says automation is behind its improved operating leverage. Low-to-median growth is forecasted for BABA stock.
2023 – One trillion shoppers
By 2036, Alibaba expects to have one trillion consumers, double the amount in 2018. Alibaba’s revenues will be more diversified. Over the next five years, the cloud and entertainment and media businesses will be contributing as much as 20 percent to revenues. Median-to-high growth is forecasted for Alibaba stock.
We believe Alibaba has fulfilled its vision of making it easier for small business to do business. Its business friendly e-commerce shop is ready to introduce more American and other global businesses to China.
So, should you buy Alibaba stock? We believe Alibaba is making it easier to do business. Having fulfilled his mission, we understand why Jack Ma is now moving onto his nonprofit projects. Considering the positive future outlook for Alibaba, it could be a good time to buy Alibaba shares.
When you are ready to buy stocks, we recommend doing so via a regulated online broker such as eToro if you’re a UK customer, and Ally Invest for U.S. customers.
If you are deciding whether to buy Amazon stock or invest in Alibaba, consider that Alibaba has over 550 million active users, and 80 percent of the Chinese e-commerce market.
Amazon has 300 million active users, and 40–50 percent of the US e-commerce market. The e-commerce giants are close in revenues at 250 billion and 232 billion, respectively. In 2018, Alibaba profits were 63 billion about six times that of Amazon’s at 10 billion. The difference in profitability is reflected in operating performance. Alibaba has an operating margin of 28 versus 5 for Amazon.
In February 2018, Alibaba announced it was taking a 33 percent ownership stake in Ant Financial as the company prepares for a future IPO. Alibaba shareholders will now share directly in the profits of the company. Ant previously had an affiliate agreement with Alibaba in which it paid royalty and technology service fees to Alibaba in the form of 37.5 percent of its pretax profit. Ant Financial, which was recently valued at $150 billion (more than double the market cap of Goldman Sachs), operates the leading mobile wallet in China, as well as a one-stop shop for financial services – digital banking, investment products, micro-loans and insurance.
Many people did not realize Alibaba was in the film making business, until its movie GreenBook won an Oscar this year. Alibaba co-produced the film with Dreamworks and Participant Media. Other movies produced by Alibaba include A Dog’s Purpose with Paramount Pictures and soon to be released Ugly Dolls with Huaxia Film Distribution and STX Entertainment. Digital Media and Entertainment is 10 percent of Alibaba revenues.
These indexes and ETFs provide a cheap way of getting exposure to Alibaba and China:
S&P New China Sectors Index (SPNCSUP)
iShares MSCI China ETF (MCHI )
SPDR S&P China ETF (GXC) fund
MSCI Emerging Market (MSCI EM) index
Indexes and ETFs provide a cheap way of getting diversified exposure to three stocks with large exposure to China known by the acronym BAT (Baidu, Alibaba, Tencent). ETFs with high exposure to BAT stocks include:
KraneShares CSI China Internet ETF (KWEB)
Invesco China Technology ETF (CQQQ)
iShares MSCI China ETF (MCHI)
Another way to gain exposure to China’s internet sector is to buy Tencent stock. The company is diversified across social media, online games, internet advertising and other sectors.
You can buy Alibaba stock from online stockbrokers. eToro and Plus500 are examples of online broker platforms where traders buy and sell Alibaba shares. After signing up online, type in the BABA ticker, place your order and you will become an owner of Alibaba shares.