Talking about Alibaba after 5 months

Five months ago, I published "Taking a Clear Stand to be Bullish on Alibaba". At that time, I thought it was Alibaba's Normandy moment. Some of the predictions inside have now come true. If you had bought Alibaba at that time, there could be a nearly 50% increase by now at the highest. As of now, I still stick to my judgment at that time. If there is a major bull market in Hong Kong stocks later, and if it is really as major investment banks and the media say after the Federal Reserve opens the interest rate cut channel, foreign capital will start allocating to Hong Kong stocks again. It is hard to imagine that Alibaba, which accounts for 8% of the Hang Seng Index, will not be bullish while the Hang Seng Index can still have a major bull market.

The reason is very simple. If Alibaba doesn't rise, it is impossible for Tencent, Meituan, and Pinduoduo to rise alone. Even if they go up, they will be pulled down by Alibaba. This means that for Hong Kong stocks to break through 23,000 points again, it has to rely on Alibaba to break through. You can't expect Meituan's market value to rise to the same as Alibaba's when Alibaba doesn't rise? Nor can you expect Tencent's market value to rise to 800 billion US dollars while Alibaba still remains at a market value of 200 billion. Take Pinduoduo as an example. I have repeatedly emphasized before that in the eyes of Wall Street in the US stock market, the valuation anchor of Pinduoduo is Alibaba. The ceiling of the market value of Pinduoduo's domestic business is Alibaba's Taotian. Now Alibaba's market value of more than 200 billion US dollars basically only considers the Taotian business, and the valuations of other businesses are all 0, which is equivalent to giving it away for free. So the valuation of Pinduoduo's domestic business part is at most 200 billion US dollars. As we have often seen before, whenever Pinduoduo's market value briefly surpasses Alibaba's, it will soon be pulled back to its original shape. I call this phenomenon Pinduoduo's "Alibaba curse". In the future, Pinduoduo's market value pull-up will either be a substantial explosion in the profitability of its overseas TEMU business, or it will rise along with Alibaba. Let's see if you don't believe it.

Obviously, for the main force to go long on Hong Kong stocks in the next step, they can only pull up Alibaba. There is no other way. The data I see shows that in this round of an epic surge in Chinese assets, the short positions of Meituan have been blown up, the short positions of Tencent have been blown up, and the short positions of Bilibili have been blown up. Only the short positions of Alibaba and JD.com have not been blown up. Since I don't hold positions in JD.com and Bilibili, I rarely track them.The short position cost line of Meituan, which has been entrenched for many years, is around HKD 150. So after this position is broken, there is a melt-up squeeze, and the short sellers are forced to close their positions and cut losses, triggering further rises. The short position cost line of Tencent, which has been entrenched for many years, is around HKD 400. By the same token, after it is broken, the short sellers are also forced to close their positions and cut losses, triggering further rises.And the short sellers of Alibaba are mainly in the US stock market.

Their cost line is around 120 US dollars. Unfortunately, this wave of Alibaba's rebound did not blow up them. The data we see is that this wave of Alibaba's short sellers not only did not retreat but instead increased their short positions against the trend when Alibaba rebounded to nearly 120 US dollars. As we can see later, compared with other major Chinese concept stocks, Alibaba has once again failed in its attempt to squeeze the short sellers. This also makes the short sellers near 120 US dollars taste the sweetness of adding short positions against the trend once again. It can be said that in recent years, the short sellers have made quite profits on Alibaba and have tried it repeatedly with success, even forming a path dependency.I even think that even if Alibaba's US stocks strongly breakthrough 120 US dollars this time, the short sellers will not give up easily. So in the later stage, the bulls need to organize a counterattack. I think it must be pulled to around 130 US dollars to completely defeat the short sellers. Remember this position from 120 to 130 US dollars. I call this the bull-bear turning point of Alibaba. Once this position is broken, with the help of short sellers being forced to stop losses and close their positions, it is a matter of minutes for Alibaba to rise to 160 to 170 US dollars.

Then let's look forward to what factors can make Alibaba return as a king and blow up the short sellers in the follow-up. We who engage in value investing are still used to sorting it out from a fundamental perspective.

1. as 36Kr reported a couple of days ago, this year's revenue growth rate of Douyin has decreased significantly, and the senior management of Pinduoduo also clearly stated at the previous earnings conference that subsequent revenue growth will slow down. The benefits of this are self-evident and will soon be reflected in performance.

2. with the introduction of the country's large-scale economic stimulus policies, there is a high probability event that the real estate cycle will bottom out and the Chinese economy will start to recover next year. At that time, when we Chinese people return from consumption downgrading to the track of consumption upgrading, the brand business of Taobao and Tmall will be the first to benefit.

3. According to the latest report of QuestMobile a couple of days ago, after Taobao opened WeChat payment, Taobao's new users increased by 55% year-on-year in September, reaching the highest value in the past four years. In September alone, Taobao added 18.67 million monthly active users, and the total monthly active user scale reached a record high of 944 million. At present, the exclusive user scale of WeChat relative to Taobao is 245 million, among which users who use comprehensive e-commerce apps more than 40 times a month reach 86.1 million. After WeChat payment is opened, these users will gradually become potential new users of Taobao.

4. The external revenue of Alibaba Cloud Intelligence excluding group internal customers will achieve double-digit growth in the second half of the year. This was announced by the CEO at the previous earnings conference. If there are no accidents, we will soon see it in next month's earnings.

5. The accelerated liquidation of inefficient and loss-making assets such as Gaoxin Retail is just like Meituan's rapid disposal of loss-making businesses this year leading to a significant increase in profits and thus realizing a stock price explosion. This can quickly improve the profit level and also support Alibaba to further increase shareholder returns in the future.

6.At the beginning of 2023, Ant Group completed the adjustment of its equity structure. According to relevant regulations, it can be listed on the Hong Kong Stock Market in two years and on the STAR Market in three years, which corresponds to the next year and the year after.

7. The international digital business group begins to achieve profitability. After years of large-scale investment, I personally expect it to be achieved next year.

In short, Alibaba is the Internet giant that has been hurt the most but has the smallest rebound strength among our local assets in recent years. According to the current rebound strength of Tencent and Meituan, it is reasonable for Alibaba to return to around 150 US dollars at least. Junior high school physics taught us that action and reaction forces. Once Alibaba's fundamentals recover strongly, it will inevitably be the leading leader with the greatest rebound strength. And this scene is likely to be realized in 2025 not far away. Let's wait and see.