With a 93 percent gain in stock price for 2017, it is clear that business for Alibaba has been booming. This exceptional growth has made investors curious as to whether or not the stock price can grow any further.
It is reported that the retail business in China accounts for an estimated $5 trillion in revenue yearly with only 15 percent of that total representing online transactions. With no well-defined lines between shopping online and offline, Alibaba should be able to continue experiencing exceptional growth for years to come. Alibaba, the Chinese e-commerce giant, experienced a 60.7 percent growth rate for the quarter ending September 2017 with an $8.29 billion in revenue.
However, it is said that even though businesses experience impressive growth rates, once the company begins to expand the growth slows. However, that is the opposite with Alibaba.
Alibaba is able to sustain its exceptional growth based on the performance of the different segments of the business. Segments such as Digital Media and Entertainment grew by 33 percent for the third 2017 quarter. Revenue from the Core Commerce segment grew 63 percent, cloud computing increased by a whopping 99 percent and innovative schemes increased by 27 percent. Additionally, operating margins was 30 percent of revenue.
Many investors would argue that Alibaba’s stock price is unreasonably high; currently at US$198.33, a little below the fair value of $200. However, based on the company’s performance which has been consistently exceptional, it is clear the stock has more growth to experience. Despite the legal, regulatory and other potential or even obvious risks in China, the uncertainty that surrounds businesses such as Alibaba, is high. But investors will be watching to see the impact these factors will have on the company while reaping the profits from the growing stock price.
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