The Value of Giant e-Commerce Stocks Like Amazon and Alibaba
Table of Content
- A decision to buy on the giant e-commerce
- The business opportunities within Alibaba and Amazon
- Comparing the value of Alibaba and Amazon
A decision to buy Alibaba stocks is different from buying Amazon stocks?
The two e-commerce giant companies have plenty in common, which makes them the best in the industry. These e-commerce stocks have much more to offer than you think. The two companies, Alibaba and Amazon, started their home countries’ operation before deciding to branch out to other related businesses and the much-growing cloud computing service.
Amazon Inc’s e-commerce business has mostly been supported by its Amazon Prime membership. The company took advantage of paid users who could use the system to make their purchases on its platform to recover the fees and increase the membership benefits, which is what many feels is a good thing when choosing an e-commerce business. This helps Amazon to increase its financial scale and optimize its infrastructure.
Alibaba Group started its operations during the days where online shopping and regular membership fees were still a foreign concept to the Chinese people. Paying online shopping and streaming services during the 2000s was something unthinkable because of poor technological systems. However, the company found a new way to penetrate the e-commerce business in another way that could not expose the company to cyber-attack.
Alibaba group realized that many customers in their Chinese region were not familiar with online shopping because of the rising concerns in fraud and quality issues during those days. The Company decided to create a new way to adopt the online transactions by creating Alipay, which Ant Group operated, where Alibaba Group owns a 33% equity stake in the company.
What has made Alipay more effective and simpler is that the company now provides multiple services such as accepting payments of offline purchases where the seller has the functional QR code and a quick checkout process for everyday routines such as food delivery ride-hailing.
Alibaba has been in the headlines since November last year because of the wrong reasons surrounding the company. Jack Ma, the co-founder, criticized the regulators, and after that, the IPO of Ant Group was suspended. The authorities quickly went up to investigate the company, which harmed Ant Group and the e-commerce operations of Alibaba, frightening the market participants. The headlines also keep themselves up with conspiracy theories as Jack Ma went missing.
The company faced other headlines during the last days of Trump’s administration. The Alibaba stock was faced with a threat by talks of an investment ban. Their share price was in the final two months of 2020. This would explain the 16% rally of Alibaba stock year-to-date before the market correction sell-off in the technology stocks and internet stocks in the past weeks. However, the Amazon stocks traded largely flat during the period and down 4% year-to-date as the Alibaba stock price manages to be up. However, e-commerce stocks still enjoyed much popularity.
Business opportunities for Alibaba and Amazon
Alibaba Group has been the leading cloud provider in China so far. This was confirmed by the industry consultant in Canalys. The company has 40.9% of China’s cloud infrastructure spend in Q3 2020. Huawei is one of the largest cloud players, with less than half the market share at 16.2%. Tencent came close at 15.8%. The Baba large market share puts it in an excellent position for more running growth in China’s cloud computing market that is expected to grow by annual growth of 7,2% by 2024. Last year the company managed to go ahead of IBM with the value doubling. While Amazon is a giant cloud computing company, Google and Microsoft are working towards changeling their dominant position.
Alibaba is one of the leading e-commerce globally as one of the most leading when it comes to online shopping. Although it seems that online shopping in China is growing very fast, e-commerce is one of the most used shopping methods since the coronavirus pandemic disrupted many across the globe. The pandemic shifted offline shopping to online shopping, contributing to the massive growth of 44.5% in the e-commerce sector. We expect online shopping to continue growing as people adjust to the news of life, and this could push online shopping to the growth of more than 50% by 2024. E-commerce stocks are prone to see sustainable gains over the next years.
Amazon is by far the leading e-commerce company in the U.S as it outpaced many companies because it is the most preferred in the country and for the fact that it has good customer service. The company is in the market where retail e-commerce sales are growing at a swift pace, and this is the same reason with Alibaba the growth was contributed by online shopping during the pandemic. U.S retail e-commerce sales are expected to grow by 6.1% this year. In contrast, China retail e-commerce sales are expected to grow faster by more than 20%, which makes Alibaba the biggest competitor, resulting in their stock prices rallying up. E-commerce stocks will be competing with each in the wake of the pandemic, as the sector quickly took off.
Comparing which stock to buy between Alibaba and Amazon
Technically, the Amazon stock has enjoyed the benefits of lockdown, with many states in the U.S being lockdown in their homes, and the only way to shop was online and the most trusted platform to use as Amazon. The stock rallied throughout 2020, with the market reaching a level of $3550, and this has been very great for the company that has reported positive earnings in 2020, showing how much the company benefited from the pandemic.
Recently, the stock has been consolidating, with the price falling from its highest level down to its September 2020 low of $2880. A break above the resistance level could signal more rally on Amazon.
Like Amazon, Alibaba was one of the pandemic beneficiaries, which resulted in the company reporting positive earnings in the 2nd, 3rd, and 4th quarters respectively.
Technically, the stock price rallying to an all-time high at $320, down from $170. The price was pushed by positive sales from Alibaba and the use of e-commerce and online shopping. However, with the pandemic situation easing slowly and many countries coming out of lockdown, this could be a problem for e-commerce. The stock price has been falling but failing to breach the support level at $210. A further rejection in the price could push the Alibaba stock for a rally to form new highs.
Disclaimer: The article above does not represent investment advice or an investment proposal and should not be acknowledged as so. The information beforehand does not constitute an encouragement to trade, and it does not warrant or foretell the future performance of the markets. The investor remains singly responsible for the risk of their conclusions. The analysis and remark displayed do not involve any consideration of your particular investment goals, economic situations, or requirements.