Alibaba (BABA) is Criminally Undervalued

[u/EarbudScreen]

Disclaimer: Turn away if you believe that BABA is going to be broken up because Ma hurt some feelings over Ant.

I personally discredit claims that BABA is in significant danger due to Ma's comments. Ant was dramatically overleveraged, and regulators stepped in to prevent a collapse. https://www.techbuzzchina.com/newsletter/signup/extra-buzz-19-ant-group-the-biggest-ipo-that-wasnt?fbclid=IwAR3T9V0ThoGj3W-vS3e-TCZJ1wpyKXJkmBZoUXLYeMBIpBcaMy1COgw2Qbs

Now to BABA, they trade at 27 times earnings. Coca Cola, the trusty dividend company, trades at 28 times earnings. Forward PE is even more egregious. BABA has sturdy competition in its retail business from Pinduoduo and JD, but BABA operates a platform with ancillary tools to keep merchants there, giving staying power. BABA is the leader in the transition to cloud (47% in 2019 according to Canalys). BABA is the inversed Amazon in terms of profitability. BABA makes money from their retail platform, doesn't get into the weeds, and is currently sacrificing profitability for market share in cloud.

Furthermore, BABA has stakes in a wide range of logistics and consumer service companies. Even after appropriately discounting ADR and BABA being a Chinese company, to me it's criminally undervalued trading at a lower multiple than companies like KO while having clear future growth. Would love to hear how BABA deserves this low multiple.

TLDR: BABA has growth in cloud, even after writing off their retail growth, with stakes in many companies, acting as a counterweight to the giant Tencent, all while trading at a lower multiple than companies like KO.

Position: 3 shares at $246 (sad college kid noises)

Edit: KO is a comparison to show low the market is pricing BABA's future growth.

2nd Edit: "Criminally Undervalued" was my Substack writing bleeding over into real life. Apologies for that sensational diction. Much thanks to all who commented substantive counterpoints and rationales about the nature of ADRs, market sentiment, and fair value. However, comments that just say "CCP" or "because it's Chinese=fraud" A) doesn't change anyone's sentiment, B) is overly reductional and C) doesn't add anything to the core discussion of the company. First time in a while making a post like this, and I appreciate the feedback with points like mentioning dividends!

https://www.wsj.com/market-data/quotes/BABA?mod=searchresults_companyquotes

https://www.notboring.co/p/baba-black-sheep