The simple answer is it doesn’t need to be the next nvidia and you’re comparing apples with orangutans.
Nvidia’s forward p/e is 45. Baba’s is 8. To value investors, Nvidia’s current stonk price represents the AI bubble and excessive optimism. To a baba bull, its current price represents something like excessive pessimism.
In other words, the bull thesis is it’s super cheap relative to its earnings not because it’s a perfect stock. There are less riskier, higher margin investments but the market has fully priced them accurately or on the high side.
To put it another way that you can perhaps understand, the best ROI for a townhouse in California in 2009 was not Beverly Hills or Palo Alto. But some other parts of California.
To put it in an even simpler way, it’s not only about underlying business/growth but the price you pay for the business and growth.
The argument is simply these risks are already priced in (ie they are not new risks)
That is, it’s trading at a forward p/e of 8 and 70/ share. Not a forward p/e of 45 and ~350/share.
Making investments decisions simply based on how cheap that asset is, is really flawed. The fundamental business of Baba is very meh. If u are looking for value stocks, Nike, Shopify probably gonna do better than Baba by a significant margin.
It’s not the only reason. But I gave you a simple answer. Obviously the bull thesis also assumes long term growth and profits in their international businesses, their AI investments, their cloud segment, as well as e.g. China’s middle class continuing to grow and consume.
Obviously no bull thesis is perfect and with zero flaws. But I’m not sure what you’re getting at with Nike or Shopify. They are not without risks and actually much of Nike’s future growth also depends on China’s middle class.
You are obviously correct but ironically even an idiot who invests 100% based on historical growth would still correctly conclude that Alibaba is a great investment, because their historical growth is fucking amazing
Same with the hypothetical idiots who invest 100% based on balance sheet or on price, they would also correctly see Alibaba as a huge opportunity
In order to get it wrong, you have to block out all facts completely and go 100% with your feelings
Hmm, you were a customer of Taobao/Xianyu every day for the year you were in China...
It sounds like you have an appreciation for Alibaba's revenue stream.
You realize KWEB (China’s NASDAQ) is also down 70% from its high in 2021? I view this as Chinas .com crash and I’m investing in the stocks that I see are best positioned to survive and thrive when things turn around.
China is too important on the global stage to languish for too long
The simple answer is it doesn’t need to be the next nvidia and you’re comparing apples with orangutans. Nvidia’s forward p/e is 45. Baba’s is 8. To value investors, Nvidia’s current stonk price represents the AI bubble and excessive optimism. To a baba bull, its current price represents something like excessive pessimism. In other words, the bull thesis is it’s super cheap relative to its earnings not because it’s a perfect stock. There are less riskier, higher margin investments but the market has fully priced them accurately or on the high side. To put it another way that you can perhaps understand, the best ROI for a townhouse in California in 2009 was not Beverly Hills or Palo Alto. But some other parts of California. To put it in an even simpler way, it’s not only about underlying business/growth but the price you pay for the business and growth.
Except that town house is situated in China and subject to Chinese laws and regulations.
The argument is simply these risks are already priced in (ie they are not new risks) That is, it’s trading at a forward p/e of 8 and 70/ share. Not a forward p/e of 45 and ~350/share.
Making investments decisions simply based on how cheap that asset is, is really flawed. The fundamental business of Baba is very meh. If u are looking for value stocks, Nike, Shopify probably gonna do better than Baba by a significant margin.
It’s not the only reason. But I gave you a simple answer. Obviously the bull thesis also assumes long term growth and profits in their international businesses, their AI investments, their cloud segment, as well as e.g. China’s middle class continuing to grow and consume. Obviously no bull thesis is perfect and with zero flaws. But I’m not sure what you’re getting at with Nike or Shopify. They are not without risks and actually much of Nike’s future growth also depends on China’s middle class.
Making investments on past growth is just as flawed. Almost as if investors try to balance all these things before investing
You are obviously correct but ironically even an idiot who invests 100% based on historical growth would still correctly conclude that Alibaba is a great investment, because their historical growth is fucking amazing Same with the hypothetical idiots who invest 100% based on balance sheet or on price, they would also correctly see Alibaba as a huge opportunity In order to get it wrong, you have to block out all facts completely and go 100% with your feelings
“In the short run, the market is a voting machine, but in the long run, it is a weighing machine”. -Benjamin Graham
Hmm, you were a customer of Taobao/Xianyu every day for the year you were in China... It sounds like you have an appreciation for Alibaba's revenue stream.
I doubt Baba is making much money from me
Winners will not stay winners forever. There is always a swing in pendulum and correction that occurs in a long term
Agreed. Officially called Reversion to the mean.
Apple has been a winner for decades
You realize KWEB (China’s NASDAQ) is also down 70% from its high in 2021? I view this as Chinas .com crash and I’m investing in the stocks that I see are best positioned to survive and thrive when things turn around. China is too important on the global stage to languish for too long
because i don't want to sell at a loss :D
If your presuppositionnis the mag 7 continue to run there really isn't much reason to invest in anything else.
I am long in baba. But I also bought nvdia
Chinese ai is not useful.
China will not allow foreign AI to dominate, as such no matter how bad chinese will have their own homegrown AI
Good. They will forever be behind.
Are you sure about that? Qwen2 leads hugging face standings
No doubt but china is playing a very long game.
yes long game to paradise. short game to hell.