The Bears Were Right About Alibaba (NYSE: BABA)

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Alibaba (NYSE: BABA) is trading in the red after the company posted lower-than-expected fourth quarter results. The Chinese ecommerce behemoth earned $0.63 a share, worse than the analysts’ forecast of $0.65. Revenue in the quarter came in at $5.61 billion, versus the Street’s expectation of $5.23 billion. The results crushed predictions made by several famous analysts that the company would beat forecasts and the stock would rise to all-time highs. MKM Partners on Tuesday recommended investors to Buy Alibaba (NYSE: BABA) shares, as the firm thought the company would post “strong results”.

Competition in China

Alibaba’s biggest competitors in mobile and Cloud are Tencent Holdings Ltd. (OTCMKTS:TCEHY), Baidu Inc (ADR) (NASDAQ:BIDU) and JD.com Inc(ADR) (NASDAQ:JD). Tencent and Baidu are in a strong partnership since 2014. Tencent is the owner of WeChat, a social media messaging app which has 768 million daily users. BNP Paribas Bank’s analyst Arthur Kwong thinks Tencent is more worthy of investment as compared to Alibaba.

Was Jim Chanos Right About Alibaba?

Famous short seller Jim Chanos, who is famous for prescient bets against famous companies, including Enron, doesn’t like Alibaba stock, and thinks that the company isn’t clean when it comes to accounting and finances. Chanos thinks that the entire operation of Alibaba isn’t visible. The founder of Kynikos Associates also warns about a credit bubble in China.


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Amazon of Asia?

But analysts think that Alibaba (NYSE: BABA) is headed to become the Amazon of Asia. Over the past few years, Amazon totally changed the market trends of the retail industry in the US. People now prefer to buy everything on the internet. Internet penetration in the US is 100%, while more than half of the population of China isn’t connected to the internet. Market dynamics in China are swiftly changing, and more and more people are turning to the internet to make purchases. Alibaba (NYSE:BABA) is the only company to take benefits of a huge customer base in China. The company is also expanding into other areas, and making businesses acquisitions in Asia.

Investment firm Needham’s analyst Kerry Rice has a “Buy” rating on Alibaba (NYSE: BABA) stock, with a price target of $135. Rice thinks that Alibaba’s stock will rise on the back of bullish first quarter results and higher sales due to increasingly personalized user experience. 41 out of the 45 mainstream analysts covering Alibaba think the stock is a “Buy” or a “Strong Buy”.