Alibaba vs. Amazon Growth Stories
If I only had two shares to choose from, it would be Alibaba Group Holding Ltd. (BABA ) o Amazon.com Inc. (AMZN)? Alibaba has had a scorching start to 2017, with the stock up nearly 42 percent so far this year. It far exceeds Amazon’s 33 percent and also the broader indexes. The S & P 500 is only a shadow below 8 percent, and the Nasdaq is a little over 15 percent.
Driving Alibaba’s appreciation seems to be founder and Chairman Jack Ma’s ability to increase revenue in recent years: to be precise, revenue has increased by more than 13 times in six years, expanding from $ 992 million in 2011 to nearly.23.5 billion from the latest annual results. That’s mind-blowing growth.
The market cap is also huge, at nearly $ 314 billion, which puts you there with some of the Giants in technology.
However, when you look at Alibaba and start comparing it from a valuation point of view to some of these tech giants, we find that it’s right in the middle of the package, and much cheaper than Amazon. That’s especially true when adjusted for growth, where Alibaba is the cheapest in the group.
Analysts expect big things from Alibaba in the coming years, with EPS growing from $ 4.21 to $ 6.95.
Earnings are being driven by strong revenue growth, which analysts estimate will increase from $ 30.65 billion to.49.03 billion.
60 percent revenue growth over the next three years? EPS growth of 65 percent over the next three years? All this is a bargain for investors who currently pay about 20-25 times for future earnings.
This is against an Amazon that is expected to increase revenue from $ 166 billion to $ 238 billion, or 43 percent under the leadership of founder and CEO Jeff Bezos. Here’s the killer though for Amazon, though. Analysts are looking for Amazon to grow its EPS from $ 6.72 to $ 18.55, that is, a growth of 176% in 3 years.
There may be worse problems than having to choose between Alibaba and Amazon. Both seem to have their biggest growth ahead. Alibaba has an advantage over Amazon on a PE, or price to earnings, basis. But when measured by price to sales, Amazon is significantly cheaper.
We can run through any number of metrics, and we could do cases for both companies. Both companies have substantial revenue and EPS growth, and with the flip-flopping of valuation, it doesn’t make it easy to choose.
For Alibaba, a wildcard is what role the Chinese government will have in the future of the company. And for Amazon, it could be so big that the US government could mount an antitrust lawsuit as it did against IBM Corp. and Microsoft Corp. However, unless something extraordinary happens, it seems that these two actions will add value for some time. As an investor, it just depends on how fast you want to go, fast or very fast.