vested
Alibaba
Alibaba dominates the Chinese market with a market share of nearly 50%, according to Statista.
Alibaba operates several business units across logistics and entertainment but its e-commerce businesses, including Taobao and Tmall, contributed two-thirds of its total revenue last year.
Alibaba's Tmall relies on third parties to sell goods, where it earns a high margin charging commissions and fees on each transaction. This lends itself to a highly profitable business, where Alibaba generated $30 billion in free cash flow over the last four quarters.
However, the company's leading role in China's digital economy also means it's vulnerable to a weak economy. Slowing growth, along with the uncertain regulatory environment in China, has sent the stock well off its highs.
Alibaba's massive reach in China's e-commerce market could set up a big comeback. Across all business segments, revenue increased 9% year over year in the September-ending quarter, with Alibaba's international commerce business growing 53%.
Moreover, the company's operating profit jumped 34% year over year, further supporting the value underpinning the share price right now.
As China's economy emerges from pandemic-related disruptions, Alibaba stock offers significant upside.
The shares currently trade at a cheap forward price-to-earnings ratio of 7.5. This is a top turnaround candidate to bet on in 2024 and beyond.
Source: TMF