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Jack Ma and the future of Alibaba

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Jack Ma, the founder of Alibaba, has announced that he will be leaving the company entirely, as of 2019. But what we want to know, is if it’s finally time to buy the dip?

 

Alibaba is the largest Chinese company in the world. They provide services from e-commerce stores, to consumer to consumer electronic payments. When they first IPO’d on the NYSE on Sept 19th 2014, the stock traded at $68 per share. This Placed the company at a huge valuation of 167.6 billion. This made it the largest IPO in US history. Since it’s IPO, BABA has returned 75.98% growing to a $421 billion tech giant. 

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Passing the torch

Jack Ma founded Alibaba in 1999, and is currently the executive chairman of the organization. Jack announced yesterday that he would be leaving the company in exactly one year. Ma currently holds the position of executive chairman of Alibaba, while Daniel Zhang has been CEO since 2014. The company reigns shall be handed over to Daniel as Jack leaves his role as executive chairman.

 

On hearing the news of Jack Ma’s retirement, markets reacted as expected. BABA experienced a 3.7% decline in today’s trading. This was a rather respectable drop in share price as well, considering the nature of tech companies and their founders. In the instance of tech companies such as Facebook, Tesla, Apple as examples,  the idea that the company founder would leave the company would instantly plunge the company stock into a freefall. Luckily this wasn’t the case with Alibaba.The modest drop in share price, is a sign of stability for the company.

A new Executive Chairman

Daniel Zhang already is well experienced at running Alibaba, and has received praise from Jack Ma himself. In addition, Daniel’s duration as CEO has resulted in exceptional performance for the company. In theory, Jack Ma’s departure in September of next year, and his complete retirement from the board in 2022 should have little effect on the company.

Buy the dip?

So what should we do? Alibaba is currently down 25% from it’s all time high of $209/share, which it reached in early 2018. Baba’s drop can be primarily attributed to the trade war between the US and China. With Midterm elections coming up soon in the US, it’s unlikely that political and economic conflicts will be resolved quickly, regardless of potential outcome. However, Alibaba’s recent focus has been expanding outside of China. This means providing their services such as Alipay and Aliexpress to a larger audience, potentially including North America. To be short, their runway for growth is huge.

 

If you have the stomach, Alibaba’s recent share drops provide an excellent buying opportunity. While it will be some time before we see any real gains, Alibaba is enroute to becoming an international powerhouse. Considering it’s ability to earn massive amounts of revenue, amass numerous consumers ( 25 BILLION dollars worth of product was sold last Singles Day alone) and a smart corporate body, Alibaba is definitely a long hold. Just be prepared to weather more tariff storms and lock your position in for a few years.