Two fund managers who operate multi-billion dollar global equity investment funds have tackled a big question that’s pondered by many tech stock investors – the Amazon vs Alibaba debate.
The verdict
At current valuations, Alibaba (NYSE: BABA) is the better buy according to the experts.
Andrew Clifford, a renowned value investor says Amazon’s (NASDAQ: AMZN) e-commerce business is “deeply challenged”.
“I’d point out, with Amazon, that this is a stock I don’t think you want to touch,” said Clifford in an interview with an Australian investment platform.
“We all know the beauty of Amazon Web Services. It is a fantastic business, like the Azure business or the Cloud business in Google, but its e-commerce business is deeply challenged.
“This (Amazon e-commerce) is a business that’s doubled its revenues for flat profits over three years. It’s had Amazon Prime, it’s had advertising revenues, it’s had everything going for it. If we were looking at that business, stand-alone, you would be running for the hills.
“And it’s about inflation, they’re putting up prices. But it’s a big employer and has a unionising workforce.”
Clifford said when considering Amazon vs Alibaba it’s an easy choice – BABA.
Amazon vs Alibaba – all about the valuations
Jacob Mitchell, another prominent value investor based in Sydney, Australia, also thinks Alibaba is currently a superior investment when compared to Amazon.
He says the recent sell-off in the Chinese stock market has taken Alibaba to a very attractive valuation.
“Alibaba is at a valuation today where it basically is discounting and shrinking pretty quickly. So why is it so cheap? You could argue it’s because the competitive environment has intensified and it’s facing competition from Pinduoduo (NASDAQ: PDD) and Meituan (HKG: 3690) – and Alibaba has decided to take all those fights on.
“So it’s losing probably 40% of its operating profits to loss-making ventures. Now, even allowing for that, the PE multiple is around 10 times, and it still is the dominant third-party platform business in China now.
“The stock is so cheap that it’s a buy.”
Year-to-date the Alibaba stock price is down around 21%, while Amazon is down around 31%.