Value Investing with Sven Carlin, Ph.D.|30. Aug.
Alibaba - Adjusting My Intrinsic Value Calculation
Alibaba – Adjusting My Intrinsic Value Calculation
The analyst reviews Alibaba's earnings and adjusts his valuation. Key points:
- Revenue growth: 9% overall, e-commerce 4%, cloud 45%, AI 16%.
- Cash flows: Operating cash flow $3 billion, but capex of $9 billion leads to negative free cash flow of $6.5 billion. Cash decreased from $60 billion to $30 billion. Share repurchases cut.
- International e-commerce: Only 1% growth – far below past promises.
Heavy investments in cloud/AI are burning cash. The analyst lowers his earnings per share estimate from 7 to $4, reduces growth rate and terminal P/E. The new intrinsic value is only half of the current stock price. He sees a margin of safety only at $60 (currently ~$33).
Citing Charlie Munger: "It's still a goddamn retailer." Alibaba hasn't delivered on past promises (2 billion consumers, user growth) in 5 years. Now shifting to AI/cloud is another promise without proof.
Conclusion: The analyst avoids betting on AI promises and looks for better opportunities.
