Monday, September 29, 2014

* Alibaba (BABA) - Silence the Noise; Introduction to Facts & Glaring Questions (5 Charts)

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BABA is trading $88.83, down 1.8% with IV30™ trading at 34.80%. The Symbol Summary is included below.

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There's a lot of noise surrounding BABA from social media to CBS to... everywhere.. yet I have yet to see some of the simplest and most important analysis set forth.

Tomorrow will be time for risk analysis, but today, let me introduce you to this company and what the firm has reported on their financials. In other words, let's hit silence on the noise, and start over with a clean slate.

And by the way... this very simple practice brings some glaring questions to light immediately.

Net Income vs. Total Revenue
We can see that BABA has ~$9B in revenue over the last year and turned that into $5B in net income (really?).  I have highlighted how that compares to AMZN and GOOGL (and a bunch of other peers).

Revenue (TTM)
Here's an image of total revenue (ttm) in a time series.  The company reported a blow out  quarter just prior to IPO (eh hem).
Revenue in the second quarter increased 46 percent year-on-year to $2.54 billion, a faster pace than the 38.7 percent revenue growth that Alibaba posted in the first quarter.

Net income attributable to Alibaba's ordinary shareholders nearly tripled to $1.99 billion, or 84 cents per share, in the quarter.

Source: Reuters Alibaba revenue soars ahead of IPO, written by Abhirup Roy and Alexei Oreskovic.

Net Income (TTM)
Here is net income (ttm).  That's some rapid (reported) growth.

Net Income Margin % vs. Gross Margin %
The earnings margin BABA reports are gigantic.  In fact, if we take gross margin % on the y-axis and net income margin % on the x-axis, BABA is essentially on an island all by itself to the right (net income margin %), while it's gross margin % is sort of "middle-of-the-road."  Eh hem...

Gross Margin %
Gross margin % is very high, but is dipping...

This is trade analysis, not a recommendation.

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