On March 4th, 2022, Alibaba’s market cap dropped below 270 billion. The last time it was this low was March of 2017, 5 years ago. Although useless for valuing Alibaba now, as the past does not reflect the future in any way (not to mention the political/macro changes), I was interested to see how things have changed in those 5 years. In this post I’m going to be looking at a few different financial metrics and comparing them to five years ago. If you’re interested in a current valuation of Alibaba, based on my thoughts for their future, check out this blog post!
We will be using Gurufocus to look at the financials, which I find to be by far the best data source for value investors. If you’re interested in joining, there will be links throughout, that I may earn a small commission from if you join!
- Net Income
- Cash, Debt, Assets, and Liabilities
- Share Buybacks
- Stockholders Equity
- Book Value, Price to Book/Sales
- Alibaba vs CCP – China Tech Crackdown Timeline
Disclaimer: At the time of this writing, I did own shares of Alibaba. I may or may not by the time you are reading this. You should do your own research or consult a professional before making any investment decisions. This blog post is not financial advice and is meant for informational/entertainment purposes only.
In 2017 Alibaba had $22.96 billion USD in revenue, or $8.92 revenue/share. Comparing that to the TTM ending Dec 2021 where they had $129.97 billion or $47.52 revenue/share. This represents a 466% increase in revenue, or a 41.44% compound annual growth rate (CAGR). In total Alibaba has received $379.7 billion in revenue since March of 2017.
For the fiscal year ending March 2017, Alibaba had net income of $6.34 billion, compared to $23.127 billion in March 2021, and 10.27 billion TTM as of Dec 2021. In total since March of 2017, Alibaba has earned $79.88 billion in net income, after taking out all fines they had to pay.
Looking at assets and liabilities allows us to look at the financial health of the company, to see if it can pay its liabilities with cash or if it will have to take on more debt/dilute shareholders.
For the fiscal year ending March 2017, Alibaba had Cash, Cash Equivalents, and Marketable securities of $21.87 billion, total assets of $73.515 billion, total debt of $13.3 billon, and total liabilities of $26.93 billion.
Comparing that to the TTM ending Dec 2021, Alibaba had Cash, Cash Equivalents, and Marketable securities of $77.7 billion (255% increase), total assets of $276.4 billion (increase of 276%), total debt of $21.9 billion (increase of 64.6%), and total liabilities of $102.2 billion (increase of 279%).
Stockholders’ Equity, which refers to the assets remaining in a business once all liabilities have been paid, has gone from $40.44 billon USD in March 2017 to $152.97 billion in the TTM ending December 2021, which represents a 278% increase. Total equity has gone from $46.58 billion to $174.2 billion (274% increase).
Being that the current intrinsic value of a company can generally be thought of all future cashflows of the company discounted back to present day, cashflow is an important metric to look at.
For the fiscal year ending March 2017, Alibaba had free cashflow of 9.47 billion, compared to 27.11 billion in the TTM ending Dec 2021. This represents an increase of 186%, or a compounded annual growth rate of 23.4%.
Alibaba has repurchased a total of $9.44 billion USD worth of stock between March 2017 and December 2021. They currently have approximately $7.2 billion dollars remaining on their current share repurchase program. If they were to repurchase the entire $7.2 billion at current prices that would allow equate to 2.67% of all outstanding shares.
Book value per share represents equity available to common shareholders divided by number of shares outstanding. Alibaba’s book value per share was $15.99 in March of 2017. As of December 31st, 2021, it was $56.92. This represents a 256% increase.
The price to book value sat at 6.74 in March of 2017, compared to 1.73 TTM. In comparison Amazon is 10.12 TTM, JD.com is 2.81, and Walmart is 4.72 TTM.
The price to sales is 2.08 TTM, down from 12.08 in 2017. In comparison Amazon is 3.01 TTM, JD.com Is 0.71 TTM, and Walmart is 0.69 TTM.
Of course, the main reason for the downfall in Alibaba over the last year or so is due to the CCP tech crackdown, so it wouldn’t really be fair to look at all the numbers without also looking at why the market cap has plummeted back to levels seen 5 years ago. So here I’ve put together a brief timeline of events, with corresponding market caps.
October 2020 - Market Cap: $858.5 billion USDAlibaba reaches its highest market cap ever, over 210% higher than current levels.
November 2020 - Market cap: ~$704 billion USDChinese regulators suspend Ant Group’s planned $37 billion IPO after Jack Ma publicly criticized the CCP on their handling of the economy. This was set to be the largest IPO ever, valuing Ant Group at around $300 billion. Alibaba owns a 33% stake in Ant Group.
December 2020 - Market cap: ~$630 billion USDChinese regulators announce they opened an anti-trust investigation into Alibaba, looking for monopolistic practices.
February 2021 - Market cap: ~$614 billion USDBeijing reveals new anti-monopoly rules for all of China’s big tech companies to follow.
April 2021 - Market cap: ~$577 billion USDRegulators give Alibaba a record $2.8 billion fine, for abusing market position and monopolistic behaviors. They also order Ant Group to transform itself into a financial holdings company.
July 2021 - Market cap: ~$505 billion USDChina’s internet watchdog orders DIDI to be pulled from app stores 2 days after IPO, and orders them to stop new user registrations, showing investors the crackdown is not over.
August 2021 - Market cap: ~$429 billion USDRegulators asked top Chinese tech firms to ‘open their walled gardens’. Alibaba and Tencent start taking steps to allow their platforms to accept rival payment options.
September 2021 - Market cap: ~$378 billion USDChina’s president Xi Jinping announces his common prosperity drive, pledging to use taxation and other income redistribution techniques to tackle income inequality. He also encourages high earnings firms to contribute more to society. Alibaba pledges $15.5 billion over 5 years.
November 2021 - Market cap: ~$303 billion USDAlibaba reports earnings which missed analyst forecasts, lowers guidance to 20-23% revenue growth from 27-30%.
February 2022 - Market cap: ~$270 billion USDAlibaba reports earnings which beat on earnings but miss on revenue. Revenue grew at only 10% YoY, its slowest growth since becoming a public company in 2014.
Although this has no effect on my current valuation, as my valuations are forward looking, it is very interesting to me that the market cap is the same as it was 5 years ago, despite the tremendous growth achieved by Alibaba. Clearly the market was pricing Alibaba for great growth 5 years ago, and much slower growth presently.
Is this one of the times when the market is overreacting to geopolitical risks? Or do you think Alibaba has fundamentally changed due to politics/competition, and their best years are behind them?