Alibaba: looking beyond low multiples

19 November 2023

Ridiculously cheap

Alibaba’s shares are down 75% from their 2020 highs. It is ridiculously cheap. Since 2015, its earnings have more than tripled, while the share price has been flat.
It is trading at 9x trailing P/E (based on the last 12 months adjusted earnings). The company adds back share-based compensation expenses to its earnings(small cheating, which is unfortunately widely common), but even if we reduce earnings for the amount of those expenses (c. $3bn), earnings multiple would still be quite low - around 10x.

Even more importantly, the company sits on a $63bn net cash position (32% of Alibaba’s market capitalisation). Alibaba has a diverse portfolio of equity investments in listed securities (with a market value of $34bn) and minority stakes in private companies ($29bn). Its c. 30% interest in Ant Financial is the main holding in the private segment.