BABA:
*Slowing revenue growth/maturing e-com pen; rising competition and falling market share.
*40% decline in core profitability in 3Q21.
*Run-rate core P/E probably about 40x post SBC with further significant declines possible.
*Regulatory risks/headwinds.
*Still over-owned.
*Slowing revenue growth/maturing e-com pen; rising competition and falling market share.
*40% decline in core profitability in 3Q21.
*Run-rate core P/E probably about 40x post SBC with further significant declines possible.
*Regulatory risks/headwinds.
*Still over-owned.
I've been arguing for a while now people have been using inappropriately low forward P/E multiples for BABA, often arguing it's on <20x 2021, excluding substantial SBC and failing to account the earnings risks & reasons why the stock has been going down in the first place.
Not saying I'm an uber bear or anything. But I've looked at and passed on the stock many times on the way down, as it still looked fairly expensive and esp too risky to me. Like Seth Klarman once said, we don't buy because it's down; we buy because it's cheap.
It is very easy to overvalue & lose money buying declines in a formerly hot company with a lot of eyes on it, that is derating due to deteriorating fundamentals. Ppl are often slow to adjust their intuitive expectations around future growth & tend to underestimate earnings risk.
Ultimately it's a Q of, are you more concerned about the risk of missing an opportunity, or the risk of losing money? I think you should be more concerned about the latter, as the world is full of opportunities. But long bull markets preoccupy investors with the former "risk".
You might make money buying BABA at these levels. Or you might end up losing a lot. Looks like a two way bet to me and it's hard (for me anyway) to conclude the odds are unusually favourable. I try to avoid two-way bets and buy stocks will unusually good odds & a margin of safety
In my experience the very best opportunities have:
*Very low multiples.
*Improving fundamentals, which are often being ignored/overlooked due to deep scars of past.
*Almost no one owns it and it's seldom in the news or talked about (esp on FinTwit).
*Stock is starting to creep up
*Very low multiples.
*Improving fundamentals, which are often being ignored/overlooked due to deep scars of past.
*Almost no one owns it and it's seldom in the news or talked about (esp on FinTwit).
*Stock is starting to creep up
They are also often in areas of the market/economy where capital has been exiting; markets consolidating; and competition reducing as well, rather than flooded with hype and capital.
BABA is the opposite of all of these things at the present time.
BABA is the opposite of all of these things at the present time.
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