Alibaba’s Financial Arm has planned to make investment in Cathay Financial Holdings despite of market slowdown
Alibaba Group Holding Ltd. financial arm has planned to make an investment of $188 million to gain approximately 60% stake in Cathay Financial Holding’s insurance unit, as per the reports by the Wall Street Journal.
Any Financial is seemed to become a main force in the online services, as it will allow it to extend its product range. The financial arm also functions Alipay, which is also an online platform with almost 400 million active users.
Zhejiang Ant Small and Micro Financial Services investment might facilitate the e-commerce giant’s license clearing process.
The decision was taken at the time, when Alibaba is under extreme pressure of falling stock price. Earlier last week, Barron’s published an article on the company, defining how much Alibaba stock can fall, which is expected to be around 50%.
Let’s compared the forward price to earnings multiple of 25x for fiscal year 2016 with 15 times price to earnings multiple of eBay Inc.
On Monday, September 14 the company replied to the article by saying that it has taken deceptive facts and used discerning information in comparing the company with other technology company. Alibaba Group highlighted many errors and also demanded explanation for that.
The company reports that relating it with the price to earnings multiple of eBay is misleading as the latter doesn’t function in China. For a good comparison of Chinese e-commerce giant’s competitor such as Tencent Holdings ADR and Baidu Inc. with price to earnings multiple of 31 and 24 times might be considered.
The analysts at Business Finance News said that recently Alibaba has managed to rise into various projects and were successful to alter the e-commerce sector landscape. It might not be the perfect time to invest into fresh projects, when you are surrounded by too many controversies.
The shareholders’ sentiments are low, as Baba stock has shed 41% of its value year to date.
MKM Partner has scrutinized the Chinese economy macro risk and company’s earnings per share exposure to anticipated currency deflation. Despite of falling Chinese stock market and macro obscurity, the research firm is confident on company’s long term guidance.
ALIBABA company stock price was down 2.33% to $64.24 at market close on Friday September 18.
The sell-side firm said that it sees a slight evidence of an impact of wealth on Chinese consumption from the current uncertainty in the markets. Stock market in volatility has not displayed its link to gross merchandise volume or spending at Alibaba in the past decade.