From Nasdaq:

Alibaba’s stock price dropped 6% after its latest earnings report, though its revenue rose 5% to $36.67 billion. While the company’s headline numbers seem reasonable, it is struggling to revive its core e-commerce and cloud businesses, despite trading at a low price of 10 times next year’s earnings. The company’s challenges include regulatory restrictions, global macro headwinds and stiff competition.

The Chinese e-commerce giant’s marketplaces had been performing strongly, with its Taobao and Tmall platforms experiencing steady growth. However, after facing a record fine and regulatory intervention, Alibaba’s revenue climbed just 41% in fiscal 2021, a steep drop considering its prior performance.

Alibaba’s core businesses experienced sluggish growth, with its cloud segment facing increasing competition from local rivals and losing major customers in the face of an intensifying trade and tech war. The company has attempted to counter this with restructuring and cost-cutting measures, but its core segments still face challenges.

Alibaba’s revenue growth by segment also paints a less than promising future, with slowing returns from its Taobao and Tmall marketplaces, underwhelming growth from its Cloud Intelligence segment, and continued unprofitability from its International Digital Commerce, Local Services, and Digital Media divisions.

Alibaba would need to dramatically increase its revenue and earnings at a compound annual growth rate of 26% over the next 20 years to turn a $10,000 investment into $1 million. Unfortunately, analysts expect the company to exhibit growth rates of just 8% in revenue and 27% in net income from fiscal 2023 to fiscal 2026, suggesting that the company’s potential for significant growth is less than likely.

The Motley Fool Stock Advisor analyst team believes that, as the market stands, Alibaba Group might not be the best stock for investors to buy. If you’re seeking higher-growth Chinese e-commerce opportunities, it may be beneficial to look into other options like Pinduoduo instead of banking on Alibaba’s recovery.



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