Alibaba is on the heels of Amazon
Gap of Market Value between Alibaba and Amazon is Just 1.3% Narrowing Nearly 100 Billion Dollars in Past Two Months.
By September 22nd, Amazon’s market value was $456.5 billion and Alibaba’s was $450.7 billion. Their gap was just 1.3%.
Almost two months ago, the gap in market value between these two companies reached $100 billion. After that, Alibaba accelerated its pace.
It has to be said that global investors really favor these two companies a lot. This year, Alibaba’s share price has doubled, while Amazon’s has gained by 27%. Alibaba and Amazon are among the most popular stocks for hedge funds according to report released by Goldman Sachs.
The Goldman Sachs’s research on portfolio strategy shows that 2017 is destined to be a year of low volatility and low returns. As a result, many hedge funds pour into these popular stocks to ensure returns.
Even with doubled share price, some Wall Street analysts still raised target price of Alibaba. They think that the enhancement of cloud revenue ability, investors’ preference to Ant Financial and Cainiao Network Technology as well as increased B2C market share and so on factors, will further boost share price.
As for Amazon, some analysts say Amazon’s cloud computing business is growing rapidly, with an expected compound annual growth rate of 20% over the next eight years. Hans Tung, the managing partner of GGV Capital told the reporter in the interview that after Amazon purchased Whole Food Market and implemented the AmazonGo mode in the latter, Amazon would grow rapidly.
Whether driven by business or capital, Alibaba and Amazon are both moving into a $500 billion market cap club.
The war is not just about capital, but on both the market and on the business. In 2016, Alibaba ranked first in the Chinese e-commerce market with 47% market share, followed by JD.com whose proportion was 20%. While Amazon had just 1.3% market share. But according to JETRO, a research firm, in markets outside China, Amazon had the highest market share in the U.S., Japan, the UK, France and Germany in 2016.
If these two companies want surpass each other, they must compete for the next rapidly growing market. The battlefield could be India or other countries in Southeast Asia, said Tung. Alibaba has invested Paytm and Snapdeal in India, and signs show Amazon may be the first in India’s e-commerce market from this year to two years later.
At the business level, neither Amazon or Alibaba regards itself solely as e-commerce company. In addition to the cloud computing business which has become a new growth point, they also are involved in the film entertainment industry.
According to their latest financial reports, e-commerce now accounts for more than 85% of company’s total revenue, and the proportion of Amazon is several percentage points higher than that of Alibaba. In the cloud computing business, which both sides highly value, revenue of Amazon AWS was $4.1 billion in second fiscal quarter 2017, accounting for 13.48 % of total revenue. As for Alibaba Cloud Computing Co. Ltd., in its first fiscal quarter 2018, its revenue was $359 million, accounting for nearly 5% of Alibaba’s total revenue.
In the entertainment industry, Alibaba’s core strategy is in Youku Tudou. While Amazon Studios starting from small crow films has won a lot of awards in recent years. Some news say that they are competing with Apple to bid for the rights to the James Bond movie franchise and turning to big budget project.
Despite having so much homogeneous competition, analysts say the two business models are different. In particular, when analyzing the future growth, you must see the difference between the two, taking into account the differences of economic environment in China and the United States.
Recently, Alibaba chairman Jack Ma interviewed exclusively by Bloomberg. When asked about Alibaba’s competition with Amazon, Ma said he hardly spent time in studying how to compete with Amazon, but paid attention to what Alibaba can one learn from Amazon. Alibaba’s job “is to encourage more companies to be Amazon”.