Opinions
Greg Dean
Alibaba Group Holding
BABA-N
COMMENT
Aug 02, 2016
Stock price when the opinion was issued
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Short answer is yes, he likes it. He was selling into strength a few months ago. Now he's looking to reload. On a 5-year chart, you can see the massive bottoming pattern. Won't see numbers like the previous highs again. Probably worth $125-150 over the next few years, if they can stimulate the consumer and the consumer responds.
Chinese consumers have tons of savings, so the potential is there. Buy on pullbacks. One of the best value retail names out there. But you have to be OK with China exposure.
Like Amazon, they dominate key secular growth areas in e-commerce, are in cloud computer though trade at only one third of Amazon's PE. Is a modest grower, but has a huge margin of safety. There's so much pessimism about tariffs now. Wait and see, but would be an opportunity if the tariffs are more bark than bite.
Has spent a lot of time over the last couple of years focusing on e-commerce. When this company went public, there was a lot of love/hate with a lot of people questioning if they could deliver on the growth people expected. It has done a better than expected job in doing that, not just the one e-Commerce business but a marketplace business, with much higher margin than people expected. His challenge is that property rights in China are not as strong as they are in North America, so you actually have a very creative structure that owns the entity, Alibaba, you are not actually a direct investor in the business. Going forward it is going to be a lot more challenging given the size of the business. As margins have compressed, he doesn’t feel he is being compensated through the valuation today.