Luca - Cryptic Trades
Markets Researcher at Cryptic Trades
Alibaba, JD.com, Nio and Baidu are criminally undervalued and could act as a hedge in the next broad market downtrend, over a 12-18 month horizon. Fundamentals explain the underperformance: retail sales turned negative year over year and new home sales are down 27%, showing years of PBoC easing have failed to reach the real economy. But that is exactly when the greatest buying opportunities form, much as with semiconductors like AMD in late 2024 and early 2025. x.com x.com
Chinese equities such as Alibaba, NIO, JD and Baidu are undervalued, because large pools of capital are likely to shift out of real estate into liquid, globally accessible assets. The PBoC has injected significant liquidity, but much has gone into savings rather than consumption, while policy has focused on stabilizing a long-slumping property market. Sooner or later that money should flow into Treasuries, crypto and Chinese stocks, making their risk-reward attractive. x.com x.com x.com
Chinese equities, including Alibaba and KWEB, look set for a rapid reversal: after months of profit-taking and decade lows in many names while US markets reached highs, this morning's inflow is a positive sign. There is still value in many of these names. x.com
Alibaba is a contrarian trade because accelerating demand for relatively cheaper compute is very underappreciated, and China's cloud market is still in its infancy versus the US. Alibaba is a consensus short as upside from closed-source AI looks illusory. x.com x.com
Alibaba is no longer worth owning when better opportunities exist. The case for it as a China hedge was a macro feeling applied to a single company, and it ignored Jack Ma being yanked away and a lack of cloud growth while leaning on share buybacks and looking too cheap to ignore. Despite its discount to US companies, other stocks, such as GitLab and Airbnb, now look much more compelling. x.com
Alibaba is sitting on its 200-week moving average just as China announces a stimulus plan, timing that supports the shares. x.com
Baidu and Alibaba look primed with Trump visiting China, while JD.com is set up to break its long-term downtrend line. x.com
Alibaba's $10.2 billion Hong Kong share placement shows its cash burn has caught up with it, and more dilution is likely. Core China ecommerce makes roughly $30 billion of flat EBIT, half of it reinvested in quick commerce to defend share against PDD. Cloud and AI earns $2 billion of EBIT growing 35% but burns about $10 billion a year in AI-model opex. Pro forma EBIT of about $7 billion collapses after $20-25 billion of annual capex, so Alibaba will keep tapping equity markets. x.com
Alibaba remains undervalued because its accelerating cloud business can carry the stock while other segments lag. Cloud revenue growth sped up to 45%, a strong acceleration on a higher base, and AI revenue posted a 12th straight quarter of triple-digit growth. Total revenue rose only 9%, margins were very low and China commerce keeps disappointing. Modeling $100B of cloud revenue in five years, fair value is $182 and the one-year target is $203, with a lower exit multiple reflecting China risk. … Show more
Alibaba and Baidu stand to benefit because China will not slow its AI development even if the US slows its own. x.com
Alibaba is tough to hold because it is splitting investment between e-commerce and AI, creating massive execution risk. AI is so capex-hungry that, as Western examples show, Alibaba cannot spread spending and still reach comparable results. The market sees China e-commerce spending, including the quick-commerce race, as having no ROI, and is right. Replies argue Alibaba has no choice; it might still make it, but the risk is that its AI push slows. x.com x.com x.com
Alibaba and Baidu are winning trades as highly cash-generative value plays, not a return to hyper-growth. With domestic tech capex matured, both are aggressively retiring shares through large buybacks and paying robust dividends, so they are being repriced like value utilities rather than high-beta tech. Hated sentiment creates asymmetric risk-reward, but expecting Alibaba to triple to $300 on old growth multiples is a trap. x.com
