Alibaba (NYSE:) is often considered the Amazon (NASDAQ:) of China.

Its platform allows merchants to reach other companies, as well as brands. Alibaba’s four segments include Core Commerce, Cloud Computing, Digital Media & Entertainment, and Innovative Initiatives.

I’m bearish about the stock. (See BABA stock charts on TipRanks)

Performance

Alibaba stock is down by 34% year-to-date, after it was widely anticipated that it would be one of the top-performing tech stocks in 2021.

China is facing serious systemic risk due to its new, hard-line policy towards big tech by the Chinese Communist Party.

Since then, the company has been in severe financial distress. The latest was the dismantling forced AliPay.

ESG and Alibaba ADR

Let’s look at the company’s listing on the New York Stock Exchange and its ESG implications.

The American Depositary Receipts of Alibaba listed on New York Stock Exchange in New York are shell companies and don’t form part of Alibaba core business. Security and Exchange Commission have questioned Alibaba’s ADR financial reporting and threatened to remove the stock from the exchange if they don’t meet the disclosure standards.

ESG has become a key component of investment analysis. ESG is an acronym for Environmental Governance and Social Practices. The importance of ESG has been lost to time. ESG stocks that have scored high over the years have had better risk-return properties than ESG stock with lower scores.

Alibaba’s failures to fulfill governance standards and the rising tensions between China and the U.S. have made it more likely that Alibaba will fail socially.

Valuation

Alibaba as a stock isn’t that impressive if we look at a relative comparison. Trailing price-to-1sales and EV-1sales ratios for Alibaba stock are lower than their sector benchmarks of 177.7%, 108.9% respectively.

EBITDA growth in the stock is lower than its sector average by 94.8% and 90.5% respectively than the 5-year average. Alibaba also has failed to meet its 5-year average earnings yield of 7%.

Wall Street’s Take

Wall Street thinks Alibaba is a Strong Buy, with an average price target of $265.09. The past three months have seen 23 Buy ratings, 1 hold rating and 1 sell rating.

Bottom Line

Many have subconsciously thought of Alibaba as the next Amazon, but the reality is that the two stocks trade in different climates.

Disclosure: Steve Gray Booyens owned a very small stake in BABA as of the publication.

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