Business Studies Scholarship Program – Why Alibaba is an underrated stock

Alibaba Group Holding equity analysis

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Q4 2019 hedge fund letters, conferences and more



TO: J. Coenen

FROM: Melissa Costello

SUBJECT: Research on cloud apps

DATE: September 2019

My name is Melissa Costello and I’m a second year student at the University of Florida. My major is Advertising and I have two minors that I’m pursuing; Entrepreneurship and International Development for Humanitarian Assistance. I’m a Christian and I’m very involved in my church and my Baptist campus ministry. I work at 4Rivers Smokehouse (a Texas style barbecue restaurant) to pay my bills and my tuition. Additionally, I volunteer in a mentorship organization and recently started my own advertising company, MFC Advertising, to help supplement my initial investments in my online trading account. I’m new to investing but I’m learning a lot! This money would help me pay for fall classes.

Why Alibaba Group Holding Ltd (NYSE:BABA) is an underrated stock

Investing In The Age Of Technology

Everyone knows that in order for a brand to succeed, their has to be some sort of marketing or awareness incentive. Technology is the backbone of our economy. I remember reading an article about how nearly 75 percent of all Americans were’t prepared to retire with dignity. This broke my heart, and even worried me. After graduating from my University, I plan on taking an internship with Disney’s Marketing department and working there for a few years, before moving overseas to do mission work. How would I manage to do something so extravagant as that without even having a way to plan for my retirement? I decided I needed to become more financially literate. And I began researching the habits of wealthy people. I knew the majority of the things: waking up early, reading, making to-do lists, but the last one caught me off guard. They all invested.

I knew I wanted to learn how to invest, but living paycheck to paycheck always seemed to push that venture beyond reach. That was until I decided to start my own advertising company, MFC Advertising. I decided to use what I’m learning in my classes to help small businesses grow. My small business is able to help other small businesses, and it feels incredible. I never knew how fulfilling it would be to be my own boss, and rise to the occasion to meet the professional needs of others. I was also surprised to learn just how much of what I'm learning in my courses at my university would prove to be immediately applicable. Additionally, I knew that I would have to use technology every step of the way.

Alibaba Group Holding Evaluation

All that being said, I needed the start up capital to invest in my business, so I downloaded the ETRADE app on my phone and started doing research. Little by little I expanded my portfolio, nothing crazy or significant, but a good starting point all the same. I learned how to decide whether it was a good time to buy or not based off of data rather than impulse. With the Coronavirus completely decimating the global economy, I wanted to see what that would do to the evaluations I had on my watch list- and that's where Alibaba Group Holding Ltd (NYSE:BABA) comes in.

In basic terms, Alibaba Group Holding is the equivalent of Amazon but for mainland China. Since their IPO, the stock has over preformed. The owner of the company, Jack Ma, continues to add on to the business model. Additionally, the buying platform now utilizes it's own cloud computing system. Initially, evaluations and forecasts for this stock were through the roof, however since the Virus went through China, the evaluation has fallen (though the stock continues to go up and down only by small amounts).

The Impact Of Racial And Ethnic Bias On The Stock

What I find the most frustrating, is that the evaluation for its competition, Amazon, in terms of "buy, hold, or sell" hasn't changed, despite a much larger dip in share price. In addition to the dip in share price, Amazon also recently had hundreds of its employees walk out due to unfair labor conditions. I think that racial and ethnic bias are contributing to the unfair evaluation of the stock, especially now that Corona Virus is often referred to as a "Chinese virus". Prior to COVID19, several financial analysis websites were maintaining their thought that Alibaba Group Holding was THE long term investment to have, some even saying that within 40 years it would hit over a million dollars per share.

Upon doing some research, I learned that recently at a shareholders meeting it had been decided to split shares with a 1:8 split ratio. This is set to take place in the summer following the IPO in Hong Kong. As most know, Hong Kong is very politically tumultuous right now, and I'm worried that American investors won't take that into consideration when the demand volume isn't as "through the roof" as expected. The stock simply needs time to thrive, as we all do, without an impending pandemic or national riots to impede on the very Laissez Faire concept it would benefit from.


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