BABA

Alibaba Shares Disappoint

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No need for boo-hooing BABA just yet. We’re aware of the poor performance of Alibaba’s shares, and we’re as disappointed as any. But we haven’t gone sour on the firm.  Chinese stocks (FXI) recently entered a bear market as the Shanghai Composite Index has dropped over 20% from its June 12 peak. The market is now in the midst of what most call a “self-correction,” as Chinese equity valuations have become out of touch with underlying fundamentals, though we maintain our view that both Alibaba and Baidu (BIDU) remain significantly undervalued. The People’s Bank of China, in an attempt to halt the recent slide in share prices, cut both its one-year lending and deposit rates by 0.25%. In addition, the … Read more

eBay Is Over $60 Per Share, Breaking Out

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I wanted to update members on eBay (EBAY), but let’s cover some ground on the (V)aluentum (B)uying (I)ndex first. The Valuentum Buying Index, or VBI, rating system is not the easiest to understand. There are as many stock-selection methodologies out there as there are fund managers and financial advisors. We’re talking tens of thousands, if not more. What we focus on within the Valuentum Buying Index framework is what matters. You may hear a fund manager talk about ROE, for example. But what you may not know is that ROE is inferior to ROIC because the former considers an artificial and non-operating boost from the application of financial leverage. We talked about this in the four-part education workshop here. Firms … Read more

Question Answered

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Let’s start with the answer first… Answer: Thanks for reaching out. You are correct. The Convergys (CVG) PDF report was updated after the Valuentum Buying Index screen was published (the screen that is on the left column of our home page). The next update of the Valuentum Buying Index screen will include the updated information. The latest article that mentions Convergys, which you reference, explains that there has been a change to the rating since the last screen. The dates are very important, and the most recent information will always be found in the individual PDF reports. We don’t have a hard-and-fast rule for the big middle of Valuentum Buying Index ratings (3-8), which we generally view as “we’d consider holding” … Read more

Market Is Catching On To Alibaba

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Since Alibaba’s (BABA) IPO in September 2014, we have been adamant about the long-term potential of Chinese e-commerce giant Alibaba. Our fair value estimate of its share price currently sits at $134. Though we expect price-to-fair convergence to happen eventually, it will take some time. Despite currency and country-specific risk concerns, as well as the recent development of potential tax ramifications of Yahoo!’s (YHOO) spinoff of Alibaba shares and whether ultimately the tax bill would land on shareholders’ laps, the company is currently undervalued, and the firm has just started to turn heads regarding the improvement in its monetization rate. To us, it will always be more important that a company is undervalued than where it generates its business. Currency … Read more

The Tax Man Cometh Anyway?

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Image Description/Source: Berlin Wall, 1963; Roger We ran a video in late January about the concerns we had with Yahoo’s (YHOO) fair value uncertainty, and it turns out they weren’t unfounded (see video). One of our biggest issues surrounding the company was the potential tax ramifications of the spinoff of Alibaba shares (BABA) and whether ultimately the tax bill would land on shareholders’ laps. It turns out that it just might. Bloomberg reported May 19 that the IRS is considering a rule change that would “affect IRS rules for spinoffs by creating new US guidelines that might require a minimum size for active businesses inside the spun-off company.” As it stands right now, Yahoo’s spin-off is just an investment entity with no … Read more

The Invincible S&P 500?

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This is the performance of the S&P 500 (SPY) since the March 2009 panic bottom. It’s incredible, to say the least. US stocks, as measured by the S&P 500 have more than tripled since the doldrums of the Financial Crisis, and for those of us that lived and breathed the markets during every day of the Financial Crisis, the lack of volatility and the ongoing, steady advance seemingly month after month during the past 6-plus years have been incredibly peculiar–and perhaps contradictorily–less-than-comforting. Any market that sets prices on the buying and selling behavior of a wide-variety of participants with differing views shouldn’t be so coordinated and one directional. It seems unnatural, or at the very least, unusual. While others are … Read more

Alibaba Shines in Calendar First Quarter

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Why are we talking about Alibaba (BABA)? First, for investors looking for opportunities outside of the US, Alibaba should certainly be on the list, one that should also include former Best Ideas Newsletter portfolio holding Baidu (BIDU)—two companies that are tied to the secular growth of e-commerce in China. Valuentum covers a broad swath of non-US companies from China, Europe, Australia, Brazil, Canada, and beyond. Our international coverage continues to expand every day. Second, Alibaba is currently a holding in the Best Ideas Newsletter portfolio. Our team passionately follows ideas we add to the newsletter portfolios and provides updates when warranted. You can read about the tremendous track record of ideas added to the Best Ideas Newsletter portfolio in the … Read more

Speculative Euphoria Is Fading

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Alibaba (BABA) is trying our patience. The company’s performance through the first nine months of its fiscal 2015 has been solid. Revenue advanced 45% year-over-year, non-GAAP EBITDA margins were nearly 60% and adjusted free cash flow came in at ~$5 billion. Yes, that’s right – free cash flow of $5 billion, and we don’t give the company credit for changes in its loan receivables in that mark. Disappointing? Hardly. Alibaba’s EBITDA increase in its most recently-reported quarter of 34%, to $2.43 billion, was better than expectations calling for ~24% growth. In our opinion, earnings matter – and Alibaba’s were good! The company’s shares, however, have fallen into the mid-$80s from ~$120 per share, and I fear that if they break … Read more

We’ve Raised Our Fair Value Estimate of Alibaba

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We have raised our fair value estimate of Chinese e-commerce giant Alibaba (BABA) on account of the firm’s stronger than expected earnings and faster pace of top-line expansion relative to our previous future forecasts. Through the first nine months of its fiscal 2015 (ending March), the company’s revenue has expanded at a 45% year-over-year clip thanks in part to strength in mobile, where sales expanded roughly 5-fold in the calendar fourth quarter. Non-GAAP EBITDA margins were an impressive 58% during the three months ending December 2014, and we expect profit margins to remain robust as expenses are scaled with robust revenue expansion. Through the first nine months of its fiscal 2015, Alibaba has generated RMB35.45 billion ($5.7 billion) and RMB31.4 … Read more

Pain in Oil Not Likely To Subside Soon; Alibaba Disappoints

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Just how bad are we drowning in crude oil? Yesterday’s inventory report showed the largest weekly supply increase in over 30 years, since 1982. That’s how bad. Yet, knowing that crude oil prices are driven by supply and demand, pundits continue to be optimistic, perhaps overly so, about the timing of the recovery in the price of the black liquid (USO). Let’s first start with OPEC, and the Secretary-General Abdullah al-Badri, who said Tuesday that oil prices have bottomed as he “warned of a risk of a future price spike to $200 a barrel.” With inventories as they are and OPEC not ceding market share to US shale-based plays, we think the Secretary-General is drinking a bit too much Kool-aid. … Read more