6/25/2021 Amazon vs Alibaba – One Big Difference
May 22, 2020, 12:10pm EDT | 47,358 views
Amazon vs Alibaba – One Big
Difference
Trefis Team Contributor
Great Speculations Contributor Group
Markets
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Amazon’s stock (NASDAQ: AMZN)
is up by over 100% since the beginning
of 2018 (through May 18). That’s good
news for Amazon. But hold on a minute,
Amazon’s rival Alibaba’s stock
(NYSE: BABA) is up a much smaller This illustration picture taken in
Bretigny-sur-Orge on May 19, 2020
26% during the same period. Hard to
shows a sign with the company's ...
believe, but Amazon stock is up more [+] AFP VIA GETTY IMAGES
than quadruple that of Alibaba. This,
despite the fact that Alibaba’s revenue growth for the 2017-2019 period
stood at 144%, higher than a solid 58% for Amazon’s revenue. We
believe Alibaba is likely a strong investment right now. Our dashboard Is
Amazon Expensive or Cheap vs. Alibaba Group gives more details
on this.
Amazon’s P/E is much higher at 107x based on its current market price
and FY’19 EPS, while Alibaba’s PE is 50x. While Amazon’s PE has
increased from around 70x in 2018 to 100x now, Alibaba’s PE is roughly
the same (50x) as it was in 2018. This explains part of the growth in
Amazon stock when compared to Alibaba. Although Alibaba generates net
profit more than Amazon ($13.1 Bil vs $11.6, respectively, in FY 19), it has
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6/25/2021 Amazon vs Alibaba – One Big Difference
less earnings per share growth valued into the stock, likely due to China’s
economic instability and trade war uncertainty.
How Do The Core Businesses For Amazon And Alibaba
Compare?
Both Amazon and Alibaba were growing fast going into the coronavirus
crisis, and the lockdown in various parts of the world will only make these
companies stronger as more people adopt and increase amounts of online
shopping. Let’s look at the core business prospects a bit more closely.
Alibaba is a marketplace, which does not own the inventory of the
merchandise sold, and merely connects buyers and sellers together. On
the other hand, Amazon is a re-seller that owns the inventory and supply
chain of its merchandise and sells directly to the customer. Consequently,
Alibaba operates a business with much less overhead than Amazon which
explains the wide difference in both the company’s margins. Amazon’s
profit margin (net income as a percentage of sales) is lower at 4.1% (as of
2019) versus 23.3% (fiscal 2019 ending March) for Alibaba.
We believe Alibaba is likely to outperform Amazon, not in the near-term,
but in the medium- to long-run. We base this thinking on Alibaba’s core
e-commerce operations which have largely higher margins, notably
lighter supporting infrastructure, and are less capital intensive. In fact,
Alibaba is able to put up more products than Amazon for its consumers,
due to its business model. Also, Alibaba generates around 86% of total
revenues from its core e-commerce global operations, while this figure is
lower for Amazon (diversified revenue stream), which makes 71% from its
online retail. Since Alibaba primarily relies on e-commerce operations, it
still has a lot of room to grow in other non-core businesses, including
Cloud and Digital Entertainment.
Trends in Stock Price over the years: From 2015-2019 Amazon.com
stock has grown at 1.1x the rate of Alibaba Group
Amazon.com stock went from $676 at the end of 2015 to $1,848 at
the end of 2019, representing a change of 173%.
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6/25/2021 Amazon vs Alibaba – One Big Difference
During the same time period, the Alibaba Group went from $81 to
$212 representing a change of 162%.
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Trends in P/E Multiple over the years: Based on trailing 2019 P/E
ratios, AMZN stock looks attractive compared to prior years and
expensive compared to BABA.
Historical Revenue Growth: Amazon.com 2014-19 annualized
revenue growth of 27% is 0.6x that of the 2014-19 Alibaba
annualized revenue growth rate of 46%.
Historical EPS Growth: Amazon.com 2014-19 annualized EPS
growth of 107% is 3.2x that of the 2014-19 Alibaba annualized EPS
growth rate of 34%.
Also See: Here’s What Factors Drove 102% Change In Amazon’s
Stock Between 2017 And Now?
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6/25/2021 Amazon vs Alibaba – One Big Difference
Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes
builds a complete macro picture. It complements our analyses of the
coronavirus outbreak’s impact on a diverse set of BABA’s multinational
peers, including Amazon. The complete set of coronavirus impact and
timing analyses is available here.
The expected timeline for recovery in global economic conditions, and in
Alibaba stock, hinge on the broader containment of the coronavirus
spread. Our dashboard forecasting US COVID-19 cases with cross-
country comparisons analyzes expected recovery time-frames and
possible spread of the virus.
See all Trefis Price Estimates and Download Trefis Data here
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6/25/2021 Amazon vs Alibaba – One Big Difference
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