Alibaba Group Holding, Ltd. made its presence felt in the US stock market in late 2014, when it went public. The Chinese e-commerce behemoth has since then given American retail giant Amazon a run for its money.
Almost 5 years ago, after Alibaba made its initial public offering (IPO), its stocks rose almost 300% in the next 5 years, sparked by growth in key marketplaces and expansions into adjacent markets.
The byword among investors was that the foreign company is "The Amazon of China." Since then, this comparison has only given Alibaba the attention it needs - and the money it came for.
The contrast is reasonable because of the massive size of China's virtual retail market. However, what makes the Chinese conglomerate a more attractive investment is its sheer confidence in competing with Amazon in every aspect of the business, including other e-commerce giants in America.
Alibaba Group Holding Ltd. (NYSE: BABA) disclosed on Friday that it will let US-based online merchants market their products to Chinese customers, an announcement that sent the Chinese firm's shares soaring to a new weekly advance of 3.35%.
Nearly a hundred percent of Alibaba's authorized sellers are China-based, a setup that is seen to create more channels to American sellers in territories like Canada, India, and Brazil. Approximately 75% of Alibaba buyers come from the US, The New York Post reported.
Relatively, the latest data confirm that direct marketing and online retail segments in China are growing rapidly compared to those in the US. According to market observers, this sector is expected to grow 12% in 2020, compared to only 6% in the US.
Despite higher growth projections, China's online retail landscape has lower debt worries and is more affordable in the "forward price-to-earnings and price-to-sales metrics," a Global X Research report bared.
While Amazon's online presence grows, so does its list of dissatisfied clients, who are unhappy about the company's poor customer service. For instance, many are disappointed at Amazon closing their accounts without prior notice.
Meanwhile, these are not issues Alibaba has to be thinking about in its neck of the woods - which is where a much bigger retail market awaits than that of its American rival. On top of this, Alibaba shares can perform equally, if not better, than that of Amazon for now, at least. Alibaba stock last traded at 20.50-times forward earnings compared to 50.65-times for its competitor.
