Alibaba’s global perspective sends share price soaring

Alibaba’s (BABA) ongoing experimentation with new ways to lure shoppers into spending their money, diversification and expansion into new territories has earned widespread approval in the markets, pushing its share price to record highs of $192.12 ahead of their quarterly earnings report (November 2). 

The Chinese e-commerce giant’s shares have more than doubled in value this year (see chart) with much of Alibaba’s growth being fueled by the internet retailing boom in China. The move into cloud computing is currently loss-making, but with the number of users almost doubling to 1 million in a year and expansion into Malaysia and India it is expected to turn that around. Also, Alibaba’s diversification into groceries, digital entertainment and financial services are showing potential for future growth. 

Alibaba’s goal is to reach 2 billion customers around the world within 20 years. In some cases, it has begun with digital payments, as in India. In others it has invested in e-commerce sites, as with Lazada, in South-East Asia. But it intends to build a broad range of services within each market, including payments, e-commerce and travel services, and then link local platforms with Alibaba’s in China.   

Alibaba’s recent success has, in part, been helped by Beijing’s severe restrictions on foreign internet companies which has allowed them to benefit from the boom in e-commerce while only contending with domestic competition. 

However, at the core of Alibaba’s success has been innovation. Sales events like its ‘11.11 Global Shopping Festival’ have been phenomenally successful and provide a platform upon which Alibaba experiment with new forms of retail and customer engagement which rely extensively on interactivity, technology and consumer analytics. 

The 11.11 event, which started at the beginning of November and culminates on the 11th of the month on their biggest sales day of the year, has promised even greater choice for shoppers and deeper levels of consumer engagement. Last year’s event generated more than $17.8 billion in gross merchandise volume – making it bigger than similar US retail events like Black Friday and Cyber Monday. 

As part of the launch of the 11.11 season, Tmall (an Alibaba subsidiary) aired its “Tmall Collection 2017: See Now, Buy Now” fashion show. Billed as “retail as entertainment,” brands from Victoria’s Secret and MAC cosmetics to Polo Ralph Lauren and Guerlain revealed their latest lines while offering viewers the chance to buy the things they saw on the runway in real time. 

If, as some suspect, Alibaba’s results are better than analysts’ projections – as they have been for the last four quarterly reports –  the earnings figures, in combination with another successful 11.11 season could see the share price break through the $200 barrier in the near future. 

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