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To invest effectively in a Chinese company like Alibaba (NYSE: BABA), you must be attentive to that country’s economy and the personal tastes of its consumers. If Chinese consumers are afraid, for example, this may not be the ideal time to own Alibaba shares.
When the emergence of the new coronavirus put pressure on the Chinese economy earlier this year, it was in fact a difficult time to maintain percentages in Alibaba. In July, however, the company’s percentage value recovered when the Chinese economy gave the impression of recovering.
What is appealing about Alibaba’s inventory is that it has so many buyable balances. For example, its percentage value fell sharply at the time of 2018, mainly due to tensions between the United States and China. However, inventory began in early 2019.
Other declines occurred in May 2019 and March 2020, but the shares returned to their past peaks in both cases. Even the global pandemic is obviously not enough to keep Alibaba’s bulls out of the game for a long time.
After peaking slightly above $260 per share, Alibaba stock took a breather in the final trading sessions of July. Examining the state of commerce in China will help to clarify whether there’s still gas left in the tank for Alibaba’s shareholders.
Investors must understand that the pandemic has induced changes that, to a certain extent, are likely to be permanent. One such change is how consumers shop.
According to China’s National Bureau of Statistics, the nation’s online sales of physical goods increased by 25% in June on a year-over-year basis. The same metric jumped 16% in April followed by a 22% increase in May.
Thus, not only is the online sales of physical goods increasing YOY every month, but the rate of increase is itself climbing.
This also happens from quarter to quarter. Specifically, China’s sales in the first quarter increased through 6% year-on-year. This figure rose to 21% in the quarter.
Even with persistent economic considerations in China, Stifel analyst Scott Devitt, however, drew a positive conclusion from the data to be held:
Clearly, Devitt referred to Alibaba when he alluded to “online players”. While reaffirming his “buy” score on Alibaba shares, Devitt increased his value target from $230 to $270.
So, if you’re worried about snubing grocery shopping in China, you can relax. The country is still buying food, but consumers are moving online. And that suits Alibaba’s shareholders.
Of course, Alibaba is the only company in the Chinese e-commerce space. However, the company continues to reign ideal in this area. I have to thank Wayne Duggan, InvestorPlace’s collaborator, for opening my eyes to Alibaba’s dominant position in China’s e-commerce sector.
As Duggan issues (using Bank of America data), Amazon (NASDAQ: AMZN) owns 44% of the U.S. e-commerce market. It’s pretty impressive, no doubt. You think Alibaba won’t be as dominant as Amazon.
Concerns about the Chinese economy are understandable. However, Alibaba’s inventory owners don’t have to worry or get rid of their stock.
China hasn’t stopped shopping, though e-commerce has changed how people shop there. Moreover, Alibaba is still the undisputed king of e-commerce in China.
In fact, you can even say that Alibaba is bigger than Amazon. And if that doesn’t convince him to buy and hold Alibaba shares, I don’t know what will do.
At the time of writing, David Moadel had a position in any of the previous titles.
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