How to Buy Alibaba Stock in 2021
People usually think that the largest e-commerce company in the world is Amazon. However, this is not exactly true as Alibaba is currently the market leader -- at least in gross merchandise value (GMV) or the total value of products sold in an online store. If you're interested in becoming an investor, check out this complete guide to understanding Alibaba's business and its stock’s growth potential.
Learn How to Buy Alibaba Stocks in 3 Easy Steps
Find a Broker
A broker provides access to the trading platform where you'll be able to buy and sell Alibaba shares. So, the first step is to find a broker and create an account. You need to provide your personal information to register with a broker, including your name, address, and proof of identity. It could take a few days as the broker needs to verify your information.
Analyse Alibaba's Chart
Once you have your new trading account, you will be able to access numerous investment tools. The most common step is to analyse price charts to identify the right timing for your share purchase. A brokerage platform may offer you plenty of insight into different stocks, so make sure you get informed before investing in Alibaba.
After successfully opening your account and analysing Alibaba’s charts, you are ready to make your first transaction. You need to make a transfer to your new trading account to be able to place your first trade. Depending on your chosen broker, you will have different funding options, including instant electronic transfers. Once you deposit the money, you can start trading.
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 to other business segments, including media and entertainment, cloud computing, and other innovative fields. Given its diverse portfolio of products and services, here are the most important aspects you should know about the company before making your investment.
Alibaba Business Model and Revenue Streams
Alibaba is considered the largest e-commerce company globally, primarily due to its unmatched GMV that passed $1 trillion in 2020. It's also the eighth enterprise in the world in terms of market cap, valued at $645 billion.
Alibaba makes the bulk of its revenue from its core commerce business, and it stems from its interconnected sites, mainly Taobao, Tmall, and Alibaba. These sites form the digital retail and wholesale marketplace where Alibaba earns revenues from various fees. These fees include marketing products and services, such as display marketing, placement services, pay-for-performance, transaction fees settled through its third-party mobile and online payment platform, Alipay, membership fees, and storefront fees.
In the FY ending March 2021, Alibaba Group Holding collected $109,480 million in revenues, representing an increase of over 40% compared to the previous year. This came from more than 1 billion annual active consumers.
History of Alibaba
Alibaba was founded in 1999 in Hangzhou, China, by a 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 major investment in 2000 from Goldman Sachs, Softbank, and Fidelity Investments, obtaining $25 million. The capital was used 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 obtained a net profit for the first time. It went on to launch Taobao and Alipay in 2003, both of which allow the company to serve its international audience better. At the same time, it successfully pushed out eBay from the Chinese market.
In 2007, the company listed its shares on the Stock Exchange of Hong Kong and introduced its cloud computing services two years later. By 2013, Ma stepped down as Alibaba's CEO but remained its Chairman, and Jonathan Lu was appointed as his successor. The following year, the company filed its IPO in the U.S. at $68 a share. Alibaba listed its shares on the New York Stock Exchange and would turn out to be the largest IPO of all times after raising $25 billion.
In 2018, Ma resigned to focus on philanthropy. During the 2020 pandemic, Alibaba stock performed quite well and even reached a peak price of $319 before a 13.56% selloff in November.
Brokers That Offer Alibaba Shares
Below is our selection of the best brokers that offer Alibaba stocks. We have reviewed each company, and these stand out because of the top-level analytical tools, comprehensive research, and excellent trading features.
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. As a result, 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 a rate of 21.07%. Analysts estimate that it will appreciate by at least 38%, with the highest target price of $395. Most of these optimistic forecasts are banking on a rebound after Alibaba's stock slid in November and December due to China’s regulators tightening internet security and an antitrust probe. As a long-term investment, Alibaba maintains strong fundamentals due to its 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 blue-chip stock with growth potential and presently trading at a discount. The stock could be an excellent buy-and-hold opportunity at its current price. 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 objectives and how a position in Alibaba's stock helps you achieve them. 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 regarding the antitrust probe and the internet security regulations, which could slow down its core commerce business and drag the stock price further down. As a result, it’s important to invest risk capital and have a diversified portfolio to mitigate such risks.
How to Buy Shares in Alibaba Stock?
You can easily buy shares in Alibaba stock through a broker or a Direct Stock Purchase Plan (DSPP). Let’s find out what these mean and which method is more suitable for you.
Buy Alibaba Shares Using a Broker
Opening a brokerage is a hassle-free process. You only need to fill out an online application form on the broker's website and provide proof of identity, such as your Social Security Number (SSN), driver's license, valid passport, etc.
Once your account is verified, you'll be able to add funds to your trading account. You can pick one of the available deposit methods offered by your broker. It’s important to note that the funding time will vary according to the chosen option. The fastest one is the electronic transfer, which may take just a few minutes.
Then, once your account is funded, you can place your first trade via a market order or limit order. If you're unsure how to do this, most brokers usually provide detailed guides regarding platform navigation. So, all you have to do is go through the information available or, if you still have some doubts, you can always contact your broker directly and seek assistance.
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. Unlike a broker, a DSPP does not come with commissions or transaction fees.
The downside of this is you have to open an account for each company, and you can't easily trade it on the open market. Also, Alibaba’s DSPP is not available to non-Chinese investors.
Frequently Asked Questions
Many investors consider that Alibaba has great potential in 2021. This is mainly due to the massive change in buyer behaviour due to the social distancing measures imposed during the pandemic. Many consumers now prefer online shopping experiences rather than brick-and-mortar shops.
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, thanks to market volatility. You can also buy Alibaba shares if you have a long-term investment strategy.
The best trading platform for trading Alibaba shares should have a wide range of analytical tools to examine its investment potential. It should also be user-friendly and offer you access to a wide range of financial assets, so you can diversify your portfolio.
Alibaba’s stock is traded on the New York Stock Exchange from 9:30 A.M. to 4:00 P.M. (ET). It is also available on the Stock Exchange of Hong Kong from 9:30 A.M. to 4:00 P.M. (HKT).
Alibaba's shares are listed on the New York Stock Exchange (NYSE) and the Stock Exchange of Hong Kong (HKEX).