Alibaba polishes its crown and its semi-hidden jewels | Opinion

Alibaba is displaying all of its jewelry. Quarterly sales growth in its main business, retail, has picked up. But cloud computing is growing almost twice as fast, while the subsidiary fintech Ant is on his way to an epic public offering for sale.

Things are back to normal for the e-commerce giant. Sales in China‘s core business, which includes its shopping portals and supermarkets, topped $ 14.3 billion in the April-June quarter, up 34% year-on-year.
That is more or less in line with its rival JD.com. Still, his peers, including archrival Tencent and local rival Pinduoduo, are having a hit. The latter’s shares have more than doubled in value so far this year.

Alibaba boss Daniel Zhang has other gems as well. Revenues from the company’s cloud computing division increased 59% to $ 1.7 billion as more and more Chinese companies switch their operations online.

The company is one of the early leaders in the nascent but rapidly growing cloud sector in China. HSBC analysts optimistically estimate that it could reach 80 billion yuan (11.6 billion dollars) in sales by 2022. At a multiple of 6.4 times the sales of the next twelve months (which is a discount compared to competitors more mature global companies), the bank estimates that Alibaba’s cloud business could be worth $ 74 billion.

Ant’s upcoming Stock Market debut is another positive point. Alibaba converted a profit-sharing agreement with its payments subsidiary to a 33% stake in 2018. That same year, Ant raised funds with a valuation of $ 150 billion, according to Reuters.

The giant of fintech is preparing a dual Hong Kong-Shanghai listing that could value it at more than $ 200 billion. Alibaba’s stake, along with its cloud arm, accounts for about a fifth of the e-commerce giant’s company value, $ 676 billion.

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Alibaba shares have risen 23% since the beginning of the year, topping the S&P 500 but lagging behind many tech peers. Alibaba shares are now reaching 27 times future earnings, according to Refinitiv data, down from Tencent’s 32 times, suggesting that the stubborn valuation discount has widened over the past two years.

Crystallizing a valuation for Ant could help close the gap, and an IPO of the cloud business could make sense as well. Zhang has multiple levers to pull them.

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