$BABA: Jack Ma Can't Be Cancelled

Syn·op·sis:

BABA is a very solid tech company that got buttfucked by recent events thanks to Jack Ma's loud mouth and the CCP authoritarian government's response to it.

Context:

So after a decade of Jack Ma obtaining immeasurable power and getting accustomed to his status in society, he delivered an infamous speech in late October that, in short, resulted in him deriding the CCP as being “backward” and having “pawnshop” mentality in China’s financial system.

As expected, Xi Jinping and most Chinese officials went - wtf did you just say did you forget this is the country where Mao zedong led the culutral revolution - and swiftly showed Jack ma who’s in charge by censoring him and making him “disappear”. The timing of this is especially relevant, as it was also during the period where Ant Group was supposedly going to go public.

To give you a TLDR about the Ant Group, it is China’s leading mobile payments platform and one of Alibaba’s spinoff. The dual listing IPO was expected to be released in HK and Shanghai, resulting in a supposed $37 billion dollar IPO aka the richest listing in capitalism’s history.

The entire Ant group situation deserves its own post, but the point here is simple - the CCP is growing weary of the influences coming from corporations on the greater Chinese society. This was already seen as a trend earlier this year, when China detained real estate tycoon Ren Zhiqiang to 18 years of prison because of criticism towards the CCP. I mean, the guy called Xi Jinping a clown lol

Given that, there's no real surprise here that there are [consequences] (https://www.wsj.com/articles/china-president-xi-jinping-halted-jack-ma-ant-ipo-11605203556) of talking shit about the CCP. I think we can condense the bear case into a word - politics. China can act as a black swan at any moment and turn trillions of dollars into zero if they suddenly decide they don't like you. This is an undeniable risk that exists for all Chinese companies that is not limited to Baba (but it does at least explain why BABA dropped to $211 in December from it's $300+ ATH despite killer earnings).

Another thing to consider is that tensions between the US and China are at an all-time high and could negatively impact Alibaba's international growth. The 2-in-1 political variable facing BABA is considerable, so why am I still so damn bullish?

ALIBABA IS STILL THE GOAT:

I don't believe that the Chinese would be stupid enough to hijack their own companies, especially when it serves as one of its most influential. Alibaba is insanely powerful, and has its roots deep into the society. Very deep into society. If you haven’t visited China (or any parts of Asia), then this point might fly over your head. But it’s not an exaggeration to say that Alibaba does everything.

They are literally Visa, PayPal, Square, eBay and amazon combined into one. Without question, they are the single hub for all things e-commerce related. It’s pretty reminiscent of Rockefeller’s vertical control, where there had a variety of competition on some specific segments, but an essential monopoly of everything when taken as a whole.

Alibaba has a plethora of sales channel that cater to various different product groups and audiences. Their ecosystem caters to almost all relationships - consumer, middleman, business, everything. You might recognize some of these services:

1. Taobao - Online marketplace and retail platform.

2. Tmall - also another online marketplace except its business to consumer

3. Alipay - literally visa and the default payment platform

THE NUMBERS! WHAT DO THE NUMBERS MEAN MASON!

They are currently trading at a P/E ratio of 26, which is abysmally low given the other valuations in the market. They also recently crushed earnings.

You don’t have to take my word for it, look at the data yourself:

• 22.03 actual vs 20.71 est. EPS

• 221.08 actual vs 215.32B est. Revenue

• 37% Year over Year increase (Revenue)

• 50% Year over Year increase (Cloud Revenue)

Cloud revenue here is of significant importance, as it is a huge driver of Alibaba’s growth. The CEO himself told CNBC that it would be its main business in the future. If we were to make comparisons with history, this looks similar to Microsoft’s pivot to cloud computing via Azure; and look how they turned out

They have a stellar record with their earnings throughout the years and have been able to weather almost all circumstances prior. Most of the analyst averaged price targets have baba at an average of $325. A Morgan Stanley analyst has it around $320 and believes that the market made the wrong call on the recent bad news.

Ray Dalio, the market cycle man himself, recently acquired a $372 million dollar investment on BABA. I can safely say that he’s not the only hedge fund holding BABA; and following the money proves that.

Alright I know some of you might not give a shit about my Siddhartha-length wall of text and just wanna yolo gamble their mom’s savings on AMC cuz stonks go up. But BABA is not the boring stock you think it is.

Look at the chart on the daily

• Baba’s recent resilience relative to the market is worth observing. When NASDAQ decided to take a shit last week and ruin everyone’s FDs, guess who was up? That’s right. When everything was down 3-7%, BABA was UP 1.5%. There was enough buying power support to push the stock up despite the general market tanking.

• Bottom support at $230 staying strong and bouncing off twice.

• MACD reversing

• I use an indicator called TTM Squeeze, which measures volatility and momentum. Technicaly speaking, it measures price movement by combining Bollinger Bands and Keltner Channels. The selling momentum on Baba has been reversing for the past few days and is looking to officially transition into a bullish momentum run on the daily. (I can elaborate in the comments if there's enough interest on the indicator)

• The zig zag on the graph I have is the 21 EMA, also known as the Goldilocks of moving averages. The price just crossed above the line on Friday, confirming another bullish reversal on the daily.

JUNE option chain

There’s a lot of interesting plays here, but pay specific attention to the super OTM options for June. Look at how much goddamn volume there is at the 440 to 460 range.

IDK if the bets here are crazy enough to think that they’ll see the stock at $460 by June, but it's more likely that “smart money” is betting on a huge upward movement in the short term and profiting from the high delta in the contracts.

DISCLOSURE

I am not a financial advisor, nor will I ever claim to be one. The goal of this post is to facilitate a more informed discussion surrounding the stock, so that we may all benefit from a better understanding of the opportunity presented in front of us thanks to Jack Ma running his mouth.

Positions

1. Safest - Buy shares (for the r/investing lurkers)

2. Safer but with leverage: Leaps (240C Jan 2022, 240C June 2022, Jan 2023)

3. The position I’m playing - 260C June 18th 2021 (23 contracts)

4. Risk it for the biscuit: 280C - 300C June 18th 2021

5. I like what I see but I dunno what risk means: 270C April 30th 2021