Alibaba is the world’s largest online and mobile commerce company by gross merchandise volume. It operates some of China’s most popular online shopping destinations, including Taobao (C2C), Tmall (B2C), and Juhuasuan (group buying). These three marketplaces generated a combined gross merchandise volume of CNY 2.274 trillion (USD 361 billion) in the twelve months ended December 2014. Its China retail marketplaces had 334 million active buyers (more than 20% of the Chinese population) and more than 9 million active sellers as of December 2014.
In our opinion Alibaba's economic moat is largely due to a strong network effect, where the value of the platform to consumers increases with a greater number of sellers, and vice versa. The company is also positioned to benefit from long-term macro trends with Chinese consumers and e-commerce.
Our 3- to 5- year projections indicate share earnings advancing at an annual pace of 20%-25%. As Alibaba shifts out of its infancy phase, we expect revenue growth to moderate from current levels. The increasing move by consumers towards mobile e-commerce applications augurs well for Alibaba over the long term.
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Alibaba has 334 million active buyers as of December 2014
Almost 70% of Chinese online customers born in the 1990s suggest a potential pattern and strong lifetime value potential.
Accuracy of accounting policies with Chinese firms
Worries about counterfeit goods and corruption within the network
Despite its dominance in China, we believe the road to overseas expansion will be an challenge for Alibaba
Rapid expansion of other e-commerce players like JD.com, VipShop, and Amazon could limit the growth potential of Alibaba in some specific product categories.
We expect a long runway of user growth in the coming years
The company is strongly positioned to benefit from the structural shift from C2C to B2C in China’s e-commerce market
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