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Editor's Note: Below is a flashback on our short Alibaba (BABA) research calls from our China analyst Felix Wang. To access our institutional China research email sales@hedgeye.com. |
WHAT FELIX WROTE YesterDAY
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No Santa Claus for Alibaba this year. As I've mentioned before, the one thing that could really topple the Alibaba empire is if the government goes after BABA's coveted and unspoken rule of "Choose One of Two". An hour ago, the State Administration for Market Regulation (SAMR) issued a one-liner headline that it recently filed an investigation into BABA for suspected monopolistic conduct such as "Choose One of Two". Separately, Ant Group is summoned for a meeting on competition and consumer rights. The uncertainty and headwinds are building up for Alibaba. Meanwhile, Jack Ma has not opened his mouth since his fiasco moment in October. With Ant Group suspended for a while (the Ant IPO was the main positive catalyst for BABA shares this year), continued difficulties on shopper growth and core e-commerce margins, and regulatory and competitive pressures ramping up for Alibaba, it's hard to own this name. I continue to see underperformance, particularly vs the other Chinese Internet giants, heading into 2021. Meanwhile if something is finally done with this exclusivity agreement, this would be a positive for the other players in e-commerce (e.g. JD, PDD, VIPS). |
WHAT FELIX WROTE ON 11/5
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Alibaba had more 'technical difficulties' than expected this quarter. Alibaba missed Bloomberg revenue estimates for the 1st time since FQ3 2019 (Dec 2018 - calendar quarter). That's a long time. The miss is concentrated in their "Other Retail" segment which comprise of Tmall Supermarket, Freshippo, direct import and Intime businesses. I had seen some weakness in Fresh Hippo in my channel checks but I was expecting a very strong quarter from Tmall Global. Tmall Global GMV grew 37% YoY in FQ2 2021. As for Tmall, GMV growth came in at 21%, which missed my 23% estimate (Bloomberg at 25%). While this was 570bps better than the estimated industry average of 17.3%, the outperformance spread is still smaller than that seen in past years. Taobao GMV grew "high teens" which is in-line with Hedgeye Proprietary GMV database's estimate of 18% growth for Taobao. BABA's shopper growth slowed for the 7th consecutive quarter to 9.2% (TTM) but basically in-line with my model estimate. Nevertheless, mobile conversion to shopper continued its downward trend for the 7th consecutive quarter. |
