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Alibaba’s Punishment for a Blowout 2nd Quarter

Have you had one of those days when you came back home with a great score for your exam, then you got kicked to the doghouse for not washing your dishes? Well, that’s kinda where Alibaba is now (and many of the other China technology companies).

Ok, to be fair, they are getting whipped back home for substantially more than not washing their dishes. Nonetheless, let’s focus on Alibaba’s great result.

First up, here’s a Reuters article headlined “Alibaba misses revenue estimates as e-commerce growth slows, regulatory crackdown persists“, and then goes on to write about the great results in the following paragraphs. The biggest disappointment is that analysts were hoping it would have performed better.

With a results summary like this:

These are huge growth numbers that any company would be proud of, unless you are company that analysts have put in a lot of expectations on you.

Massive User Base

A Billion Alibaba Active Customers with at least one or more orders in the past twelve months globally. This is awesome numbers when compared against any other global company.

The Goldmine and the Canary

Next up, is some great numbers on the Alibaba ecosystem, and a big part of their success is built on all their complementary services for the customer. A big component of online engagement is the size and quality of the community. Alibaba has been very successful in serving all the communities, both locally and globally. However, the recent government clampdown on technology company’s interconnectedness puts pressure on this success model.

Should you buy Alibaba stocks?

The truth is that Alibaba has built a successful business on serving communities. The current government crackdown does affect how Alibaba can do business in the future.

If a company has been selling over priced crappy products to consumers who have not other choice, then it would be a worry. However, we believe that this is a good opportunity for Alibaba to re-design itself for the future.

Alibaba has been providing a great service for consumers and we believe they will transform and continue to do so in the next decade.

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