Alibaba (BABA) Stock | Long Term Analysis | Overvalued or Undervalued |

Transcript (auto-generated)

All right hello and welcome everybody tyler’s talking about sphere where today we’re talking about alibaba tiger symbol b-a-b-a now this company is traded on the new york stock exchange and this is a company that i definitely want to talk about for quite some time i already made a video about this so that is an older video now and so i wanted to come up with maybe new things that we could add to our long-term analysis so this is going to be a full redo of the long-term analysis of this company so i want to talk about the valuation of this company so we’re going to determine whether the stock is override or undervalued then i want to give you a long-term announcement on this company which talks about exactly how this company works where it drives a lot of its revenue et cetera so i’m going to try to compare this against other companies as well in order to determine maybe whether this stock may be a good buy for the long term or maybe a salary even so i will talk about both scenarios getting to a little bit of that etc so if you like this video please do like subscribe it’s about our channel and let’s get this content out to more people so that where people can understand how alibaba works and also other stocks that we talk about work as well on our channel anyway thank you so much for watching without further ado let’s get started now if you aren’t aware of what alibaba does essentially they are a e-commerce company for china so this is a company that was developed in 1999 by a guy named jack ma and essentially alibaba is similar to ebay or amazon when it comes to connecting buyers to sellers alibaba is still quite different from these companies so i’ll go into detail about that in a moment this was funded by softbank to really allow it to take off and this was back in its early years so this is one of softbank’s if not their best investment of all time so this is definitely a very successful company and has been very successful for many years now in terms of the business model that they work with i’d consider ebay to be most similar to alibaba in terms of their online selling platform alibaba is similar amazon in ways as well where alibaba actually invests in companies that are actually pretty successful and these companies can even resemble formidable companies in america so for example this company also owns yoku so or uku it’s y-o-u-k-u this is an online video platform in china which is very similar to youtube here so google owns youtube here at this time however alibaba owns a lot of these media companies as well they dedicate about four or five percent of their investments to that loan so this stock seems even more of a growth stock now if we go back to talking about alibaba specifically and how they work in terms of their ecommerce platform i have noticed that alibaba seems to be a bit more difficult to navigate as compared to amazon so definitely keep that in mind as i have found alibaba at least from my perspective to be a bit more difficult to navigate i find a lot of companies or find a lot of sellers that you need to contact them before you can even buy anything so you can’t just do what amazon does where you can just go in and then buy something directly so you have to go into a bit more work which can be a bit more challenging so definitely keep that in mind now alibaba does actually offer a pretty interesting alternative to amazon which is that you can buy most things in bulk now you can notice here that the company is willing to sell you essentially over 5 000 pairs of shoes and this is just one example you can see that the company is definitely pretty interesting for the fact that you can literally if you want to buy more than just a few pairs of shoes you can get better prices as you go along so that is essentially if you own a big company or something like that and you want to buy something you can get better prices on maybe you know for example shoes like we have here or a different product so keep that in mind if you’re trying to buy maybe t-shirts that you can contact the seller to maybe make a special t-shirt for you and so i do find this company to be pretty fascinating for that reason i also find it to be a lot cheaper to buy through alibaba than maybe to buy through amazon or ebay but this really just does depend on what product you’re trying to buy it’s so it’s definitely not just everything is cheaper so keep that in mind but i have found better prices on alibaba certainly so from a general perspective i think they offer solid long-term growth potential we do want to understand that the company may not grow fast or get split up by the government so i think that’s the largest problem in my opinion so with a significant concern like that people have been clearly hesitant on investing in this business however there is a significant growth potential for a stock that is in this e-commerce business and they are the dominant e-commerce company in china now this company has the intrinsic value of 154 dollars a share or 154.61 cents a share approximately this is the projected free cash flow model of calculating the agent value and so i won’t show you exactly how this is calculated what you can see here is that they have a growth multiple which is essentially the projection of the growth of the earnings each year so this is a percentage growth of the earnings each year so since this company grows relatively quickly and earnings they are projecting it to grow faster in earnings every single year so this is a very high percentage for a growth multiple so just keep that in mind that essentially offers a premium for the stock then you multiply that by the free cash flow which is just a six year average of that then you add the total stocks exactly which is simply the assets minus the debt of the company multiply that by 0.8 to offset the growth multiple then divide by the shows out staying in the market in order to get the intrinsic value per share of the company so this is just one way of calculating the intrinsic value but there’s many ways of calculating the intrinsic value so definitely keep that in mind this company has a book value of about 56 a share or 55.86 cents as we have here so this is essentially the asset value of the company this is after taking the shareholder equity and then dividing it by the outstanding shares in the market so keep that in mind this is essentially the worth of the company by assets this company has a lot of assets so this helps to increase the intrinsic value and support the interesting value which helps to justify the trading value so by 10 goals this book value is actually pretty high especially for an e-commerce company so i think that this book value is actually pretty good right now so as compared to the trading value this gives a price of about three and i think that’s very reasonable for this stock and for other e-commerce stocks at this point as you can see the company’s share with equity has been increasing year over year and so now it’s at about 172 billion dollars which is plenty so this company is bringing plenty of money and then they’re just keeping it within the business so as they reinvest in their company and they grow their shareholder equity that helps to increase the book value which helps justify a higher intrinsic value and helps justify higher trading value so it all kind of links together in the end even though this company has been increasing its debt even a little bit that is perfectly okay because they have more assets to offset the shareholder equity because remember the assets minus the debt the company is equal to the shareholder equity so if the shareholder equity is growing that means that the assets are still also increasing next to the debt and increasing as fast as the debt may be increasing and it’s actually would be increasing faster the assets are increasing out faster than that than the debt that’s why the shareholder equity is growing that’s great for the company and i expect the companies show likely to consistently grow because the company still has plenty of income to consistently reinvest in its own business and also keep more cash for itself and do other things like that to help grow the shareholder equity this company currently makes about seven billion dollars a quarter and this just depends it really goes back and forth now this information may not be totally accurate on the income i’m not too sure but the real point is that the company has a net income that is positive and the company is bringing plenty of money so yearly they bring in about 23 billion dollars that is plenty of money they can keep this and then reinvest it back into the company so this is great and so i hope that this company will be able to consistently grow as alibaba consistently reinvest in itself and does other things like that now they could offer a dividend but a lot of other e-commerce companies don’t do that so amazon is prime example they do not offer a dividend at this point so i don’t expect alibaba to offer a dividend either now with the recent dip in the share price this company has a pretty low price during so about 20 relative to previous years which trade tends to be at about 30. so keep that in mind the last time it was that low was really about 2016 and then also at the beginning of 2019 then it jumped so that’s when the share price jumped and this company had more earnings et cetera so this company really can do very well during a pandemic and that’s really why this company has been consistently able to increase in earnings at this point because they’re an e-commerce company so they are consistently able to offer a service that can be offered during a pandemic so if you’re looking to hedge against maybe potentially another pandemic or maybe the delta variant for covid financially this company should do very well over a pandemic now if we take a look at the outstanding shares in the market we can see that the company has been generally issuing more shares as time has gone on which is not good for the shareholders so the point is that if there’s more shares outstanding the assets have to be distributed across more shares so your shares are worth less so that is normally a big problem however this company has been able to consistently increase in their income generally and they’ve also be able to consistently increase in shareholder equity so therefore the company’s book value is actually still increasing so this company still has an increasing book value so that is helping to protect shareholder value so overall what do we think about this company well i think this company could be a good long-term buy in order to hedge against maybe the future risk of a pandemic or something like that i think that this company will be able to do very well just in growth and just in terms of growth but this company does have its risks let’s say the chinese government decides to crack down this company and make sure the company is unable to essentially grow by just splitting it up consistently then that could cause a lot of issues for alibaba and that could cause a lot of issues for the shareholders so i don’t think this company is being much of a value stock as they are more fair valued at this point but they seem to be a very strong growth stock as long as you are willing to take the risk that they could have potential issues as compared to amazon which is an american company which doesn’t have that kind of government scrutiny so this is just in my opinion i am not a financial advisor or anything like that this is not financial advice so please do your own research for investing anyway thank you so much for watching if you like this video please do like subscribe it is about our channel and please comment down below and tell us if you think about this company we’ll try to get back to you anyway thanks again for watching and have a great day everybody