Alibaba Group Holding Ltd(NYSE:BABA) gets 83% of its revenue from e-commerce within China, and is looking for the global expansion to reduce its dependence on the Chinese economy. The growth of the online business has begun to slow and BABA has taken the leap for the offline business. Further, the transaction volume has fallen on Alibaba’s online shopping platforms where sales growth has decelerated in recent quarters, which had led the e-commerce firm to expand into other areas such as online video and local services as well as looking for expansion of offline business. Meanwhile, in 2015 BABA had invested $4.6 billion in electronics retailer Suning Commerce Group Co Ltd , which was then the biggest step to integrate the online and offline shopping. Additionally, BABA is a leading bidder for the takeover of department store chain Intime Retail Group Co. private for approximately $2.6 billion.
The deal for the takeover of Intime will strengthen the foothold in the physical retail and will allow the company to explore ways to modernize a $4.5 trillion industry which was not taken of well to the growing popularity of online shopping. Moreover, in the deal Alibaba Investment Ltd and Intime founder Shen Guojun have offered HK$10 ($1.29) per Intime share, which is 42.25 percent over the HK$7.03 price when the trading stopped on December 28th pending an announcement. As a result, the stock reacted positively and rose 38 percent after the trading resumed.
Department store chain Intime Retail Group Co. has operations over 29 departmet stores and 17 shopping malls in China, mainly in the first-tier and second-tier cities. However, Intime’s profit has fallen 21.3 percent in the first-half of 2016, but Intime would allow BABA to give brands a physical presence or act as collection points for online shoppers and will allow BABA to implement a series of long-term growth strategies.
On the other hand, BABA’s Chairman Jack Ma met with Donald Trump to discuss how the online retailer could help create 1 million new U.S. jobs. This could be done by creating positions would be generated through BABA by adding 1 million small and medium-sized U.S. businesses to its online platforms, and its estimated that each one will hire a new person as a result of the added business.
BABA stock has risen 33.79% in a year (source: Google Finance). According to tipranks.com, 14 analysts has covered the stock while recommend a “Strong Buy”. BABA has an average price target of $122.50, which is a further upside of 29.33%.