Source: PaxForex Premium Analytics Portal, Fundamental Insight
As China's largest e-commerce and cloud infrastructure platform company, Alibaba is not often associated with other countries. However, in the last quarter, 301 million of Alibaba's 1.28 billion annual active consumers were actually outside of China, and international trade revenue accounted for almost 7% of the company's total sales.
Alibaba mainly serves other countries through AliExpress (a cross-border trading platform that helps Chinese merchants reach overseas buyers), Southeast Asian trading platform Lazada and Turkish trading platform Trendyol. This overseas segment is heavily influenced by Russia's invasion of Ukraine, as both countries are major markets for AliExpress.
Alibaba lists Russia, the U.S., Spain, France, and Brazil as AliExpress' top markets. Russia has been the company's biggest market since 2013, and its Russian business has grown so much that it eventually created a new joint venture, AliExpress Russia, with three Russian investors in 2019.
After this deconsolidation, Alibaba classified AliExpress Russia as an investment rather than part of its international trade business. However, AliExpress' Chinese cross-border business, which still sends goods to Russian customers, remains part of the international trade segment.
AliExpress Russia claims it was the most visited e-commerce site and the most downloaded shopping app in Russia in 2021, with 35 million monthly active users (MAU). The company currently controls about 10% of the Russian e-commerce market and plans to double its share to 20% by 2025.
Back in 2020, AliExpress Russia predicted that it could boost revenue to $10 billion by 2022 or 2023, serving 50 million customers. Last October, the company announced that its gross merchandise volume (GMV), or the value of all goods sold on the platform, rose 36 percent year over year to R133.3 billion ($1.86 billion at the time) in the first half of 2021.
AliExpress Russia had planned to raise new capital through an IPO in 2022. However, recent economic sanctions against Russia (which affected all three Russian founders of the joint venture), the collapse of the ruble, and the closure of the Moscow Exchange likely derailed those plans.
For now, AliExpress Russia continues to fulfill orders as the Chinese business of AliExpress continues to make cross-border deliveries to Russia. However, another round of secondary sanctions may be imposed against AliExpress in other markets for continuing to operate in Russia.
Ukraine has also been one of AliExpress' fastest-growing markets in recent years. In early 2022, SimilarWeb named AliExpress the fifth most visited e-commerce site in that country, but as the war escalates, AliExpress will likely have to leave this once-promising market.
Alibaba has not disclosed how much revenue it generates in Russia and Ukraine. But based on the size of Alibaba's entire international division and AliExpress Russia's previous deconsolidation as an investment, it's safe to assume that these two countries bring in less than 1-2% of the company's total revenue.
Baird analyst Colin Sebastian recently called Alibaba's stake in Russia and Ukraine "quite modest," while noting that AliExpress Russia - in which the company owns only a minority voting stake - is still a "small investment."
Nevertheless, Alibaba's international trading business is still growing much faster than its domestic trading platforms, which face tough macroeconomic and competitive hurdles. Lazada also continues to struggle with Sea Limited's Shopee in Southeast Asia, which in recent years has surpassed it as the leading e-commerce trading platform in the region.
Russia and Ukraine could bridge the gap between China and AliExpress' European markets. Its growth could also tie more Eastern European markets to the e-commerce ecosystem. Abruptly breaking this bridge would hamper the company's international business development and force it to reconsider its long-term expectations for the Russian and European markets.
Alibaba can probably afford to exit Russia and Ukraine without serious damage to its international business. But, like DiDi Global, it will probably continue its operations in Russia to avoid a PR impact on Chinese companies that have left the country.
For now, Alibaba is likely to keep quiet about Russia and Ukraine, continue to expand into other markets, and focus on strengthening its core e-commerce and cloud business in China. However, investors should still keep a close eye on the company's Russian business and see how the ongoing conflict and sanctions will affect its international business and investments.
As long as the price is above the 100.00 level, follow the recommendations below:
As long as the price is below 154.50, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 111.96
- Take Profit 1: 125.00
- Take Profit 2: 139.00
Alternative scenario:
If the level of 100.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 100.00
- Take Profit 1: 87.00
- Take Profit 2: 72.00
