People usually think that the largest e-commerce company in the world is Amazon. However in reality, it's Alibaba -- at least in gross merchandise value (GMV) or the total value of products sold in an online store. And if you're interested in becoming an investor, then this page offers you a complete guide to understanding Alibaba's business and its stock’s growth potential.
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Learn How to Buy Alibaba Stocks in 3 Easy Steps
Find a broker
A broker will provide you access to the trading platform where you'll be able to buy and sell Alibaba shares.
Analyze Alibaba's chart
From your broker's trading platform, you'll be able to visualize how Alibaba's stock price has traded and is currently trading. This will allow you to analyze its future direction by applying technical analysis.
After you have concluded your analysis, the last thing to do is to place a trade and manage how your investment goes.
Alibaba Company Overview
Alibaba is most known as the e-commerce company whose related businesses make up a global digital marketplace for merchants and consumers. Its success and growth have led it to expand in other business segments, including media and entertainment, cloud computing, and other innovation initiatives. And Alibaba Group Holding Limited is the holding firm that manages these diverse companies.
Alibaba is considered the largest e-commerce company in the world, which is primarily due to its unmatched GMV that passed $1 trillion last year and it's also 8th in the world in terms of market cap with $645 billion.
Alibaba Business Model and Revenue Streams
Alibaba makes the bulk of its revenue from its core commerce business, and it stems from its interconnected sites, mainly Taobao.com, Tmall.com, and Alibaba.com. These sites combine to form a digital retail and wholesale marketplace where Alibaba earns from various fees.
These fees include various marketing services (e.g., display marketing, placement services, pay-for-performance (P4P), etc.); transaction fees settled through its third-party mobile and online payment platform, Alipay; membership fees; storefront fees; and other services.
Alibaba Group also generates income from its other business segments, but they comprise only 12% of the reported revenue ($33.9 billion) in Q3 FY 2021. Its cloud computing is the second-largest revenue stream, which generated $2.5 billion, while its digital media and entertainment and innovation initiatives generated $1.4 billion.
History of Alibaba
Alibaba was founded in 1999 in Hangzhou, China, by Chinese entrepreneur Jack Ma and 18 other friends and students. Ma wanted to build an e-commerce company after noticing a significant absence of Chinese firms leveraging the digital marketplace.
The company landed its first big investment in 2000 from Goldman Sachs, Softbank, and Fidelity Investments for $25 million. The investment was to improve Alibaba's domestic e-commerce market and e-commerce platform that serves small and medium-sized firms in China.
Three years after its founding, Alibaba turned a profit for the first time. It went on to launch Taobao and Alipay in 2003, both of which position the company to serve its international audience better. And in that same year, it successfully pushed out its competitor eBay in the Chinese market.
In 2007, the company listed its shares on the Hong Kong Stock Exchange and introduced its cloud computing services two years later.
By 2013, Ma stepped down as Alibaba's CEO but remained chairman, and Jonathan Lu was appointed as his successor. The following year the company filed its IPO in the U.S. market at $68 a share. Alibaba listed its shares in the New York Stock Exchange and would turn out to be the largest IPO of all time after raising $25 billion.
In 2018, Ma also resigned from his post as chairman to focus on philanthropy. And amid the pandemic last year, Alibaba stock performed quite well and even reached a peak price of $319 before the -13.56% selloff in November. Alibaba's latest close as of writing was $233.89.
Brokers That Offer Alibaba Shares
Below is our selection of the best brokers that offer Alibaba stocks. We have reviewed each company, and these companies stand out because of the top-level analytical tools, comprehensive research, and excellent trading that they provide.
Should I Invest in Alibaba Stock?
Alibaba is already at the forefront of a continuously expanding Chinese middle-class with a thirst for spending and a changing global trade landscape that benefits using its platform. And yet, its investment value still points to the upside.
Alibaba's current position in the world of e-commerce is enviable, with revenues rising at record highs each year. Therefore, buying Alibaba's mega-cap stock represents a long-term bet in a blue-chip stock with serious growth potential.
Alibaba Stock Investment Potential
Alibaba's stock price has been growing annually at 21.07% from its IPO price to its latest close. Analysts estimate for the stock to appreciate at least 38%, with the highest target price of $395 as of late.
Most of these optimistic forecasts are banking on a rebound after Alibaba's stock slid in November and December due to China regulators tightening internet security and an antitrust probe. As a long-term investment, of course, Alibaba maintains strong fundamentals with commanding control of the Chinese e-commerce market.
What Kinds of Investors Should Include Alibaba in Their Portfolios?
Investors who stand to gain from purchasing Alibaba shares are those looking for a big business that is still in growth mode and is trading presently at a discount.
The stock could be an excellent buy and hold at its current price as its prospects of overcoming its present challenges are in the cards. Its cloud business is also flourishing, giving long-term investors a chance to get in on the trend early, especially as the world becomes more reliant on technology.
How Much Should I Invest in Alibaba
Before investing in Alibaba, you should consider your investment objective and how a position in Alibaba's stock helps you achieve it. Remember that despite the stock's predicted growth, there are still risks associated with it.
For instance, there could be no clear path for a resolution in the antitrust probe that the company is facing and the internet security regulations this year, which could slow down its core commerce business and drag the stock's price further down.
That's why it's always a great idea to use risk capital or the amount you can afford to lose when investing in individual stocks or at least diversify to other blue-chip companies.
How to Buy Shares in Alibaba Stock?
When you've decided to start trading Alibaba shares, you will need a brokerage account, as mentioned. So, the first thing that should be on your list is to get your account approved. This could take a few days to more than a week, so it's essential to submit all the requirements at this stage to expedite the verification process.
Once your account is verified, you'll be able to add funds to your trading account. From here, you need to pick among the available deposit methods of your broker. Compare your choices and select the one that offers you the most convenience and the lowest cost. Funding time will vary by the funding option. The fastest one is with electronic transfers, which take just a few minutes.
Then, once your account reflects the amount you deposited, you can proceed to place your first trade. If you're unsure how to do this, most brokers usually have instructions for navigating their platform. So, all you have to do is review them carefully, or if you still have some doubts, you can always contact your broker directly and seek assistance.
Buy Alibaba Shares Using a Broker
Opening a brokerage is a painless process. You only need to fill out an online application form on the broker's website and provide proof of identity, like your Social Security Number (SSN), driver's license, valid passport, etc.
Typically, your broker would also need your employment details and proof of income. Of course, all of these are standard requirements that brokers need to comply with for anti-money laundering, anti-terrorist financing, and tax law purposes.
Buy Alibaba Shares With a Direct Stock Purchase Plan (DSPP)
The most popular choice for trading stocks is to use a broker. However, there are other ways to buy shares, one of which is a Direct Stock Purchase Plan (DSPP). A DSPP allows you to purchase the shares directly from Alibaba. This exempts you from the per-transaction fee of brokers.
The downside of this is you have to open an account for each company, and you can't easily trade it in the open market. Also, Alibaba’s DSPP is not available to non-Chinese investors.
Frequently Asked Questions
Analysts have a consensus buy rating right now for Alibaba, with a target price that's as high as $395 per share.
Yes, Alibaba has been consistently profitable for several years. In 2020, the company's net income was $21.42 billion.
Yes, even if your strategy is on a short-term basis, there are potential profits to be made in trading Alibaba's stock.
The best trading platform for trading Alibaba shares should have a wide range of analytical tools to analyze its stock accurately.
Alibaba’s stock is traded during the standard trading hours in the U.S., which is from 9:30 am to 4 pm ET. On the other hand, its shares on the Stock Exchange of Hong Kong are traded from 8:30 pm to 3 pm ET.
Alibaba's shares are listed on the New York Stock Exchange (NYSE) and the Hong Kong Stock Exchange (SEHK).