On Aug. 17, BABA (BABA) rose more than 5% in intraday trading due to its outstanding quarterly performance, and its market capitalization officially broke through the $400 billion mark to $414.6 billion. Meanwhile, another ecommerce giant, Amazon.Com Inc, fell back to $461.4 billion after hitting a market capitalisation of $520 billion at the end of July, leaving BABA and Amazon.Com Inc just 10 per cent short of market capitalization.
Comparison of share prices of BABA and Amazon.Com Inc:
(note: blue is the trend chart of BABA's stock price)
Before we talk about BABA, let's first understand why Amazon.Com Inc's market capitalization once exceeded 500 billion US dollars.
三The big money-attracting business helped Amazon.Com Inc's market capitalization once exceeded 500 billion US dollars.
What is the concept of 500 billion dollars? With more than 90% of the world's national GDP, Amazon.Com Inc perfectly explains what is meant by a rich country.
Why should Amazon.Com Inc?
Let's first take a look at Amazon.Com Inc's business. Many people say that Amazon.Com Inc is an e-commerce giant, which is a big mistake. Amazon.Com Inc's core business consists of three parts:
First: Prime business-- Amazon.Com Inc's membership service
Second: Marketplace business-- Amazon.Com Inc's third-party seller platform, as well as proprietary merchandise business
Third: AWS (Amazon Web Services) business-- Amazon.Com Inc's cloud service.
First of all, let's talk about Prime business, its model is very simple, that is, if you give Amazon.Com Inc 99 US dollars a year, you can enjoy a series of super services, such as free postage, free video and music on the platform, free reading books, magazines, etc. At present, the total number of members has exceeded 60 million, contributing more than 6 billion US dollars to Amazon.Com Inc every year.
The second business, Marketplace business, shows that there are more than 2 million third-party merchants on Amazon.Com Inc platform by 2016, accounting for 40% of total sales each year and is expected to account for 50% by 2020.
The third business, Cloud Services (Amazon Web Services), AWS was founded by Amazon.Com Inc in 2005 and is currently the best cloud service provider in the world, with the best customer base in the world, including General Electric Co, Siemens and Netflix Inc (NFLX). Cloud services contribute US $12 billion to Amazon.Com Inc every year.
Amazon.Com Inc's three major businesses are like three closely meshed and high-speed rotating gears, resulting in a huge flywheel effect.
Prime service greatly improves customer loyalty. Marketplace business introduces third-party merchants to provide more goods for customers to choose from. Scale effect greatly reduces marginal costs and improves bargaining power. Finally, third-party merchants and enterprises can put their information systems on AWS. Together, the three major businesses supported Amazon.Com Inc's market capitalization of more than $500 billion at one time.
In the face of such a "strong rival", how does BABA challenge?
So, what ability does BABA have to catch up with Amazon.Com Inc?
As we all know, BABA is the largest e-commerce giant in China. Except for its membership business, other business models are similar to Amazon.Com Inc's, including e-commerce and cloud services.
Only from the perspective of financial data-net profit, the growth of BABA is temporarily better than that of Amazon.Com Inc.
On the evening of August 17, BABA released financial data for the first quarter ended June 30, which showed that BABA's revenue in the first quarter was about $7.403 billion, up 56 per cent from a year earlier. Net profit is about $2.07 billion, up 96 per cent from a year earlier, and up 67 per cent year-on-year if it is calculated on a non-Non-GAAP basis of about $2.953 billion. BABA's data for the first quarter:
Amazon.Com Inc's revenue in the second quarter of 2017 was $38 billion, up 25 per cent from a year earlier, while net profit was $197 million, down 77 per cent from $857 million in the same period last year, and operating profit was $628 million, down 51 per cent from $1.3 billion in the same period last year.
Since Amazon.Com Inc announced its second-quarter results at the end of July, its share price has fallen by more than 11%, and the gap between market capitalization and BABA has further narrowed.
It is worth mentioning that BABA rose more than 13% on June 8 this year, because BABA said that revenue in fiscal year 2018 is expected to increase by 45% 49% compared with the same period last year, which far exceeds the market's analysis and forecast of 36%, 38%. Therefore, BABA's beautiful financial data for the first quarter is also expected.
So far, BABA is better than Amazon.Com Inc in terms of revenue and profit growth, and it is just around the corner for the market capitalization to exceed Amazon.Com Inc.
In fact, BABA was significantly ahead of Amazon.Com Inc in terms of market capitalization. BABA had a market capitalization of more than $230 billion at IPO in September 2014, while Amazon.Com Inc had a market capitalization of about $150 billion at the time. But in 2015, BABA's fake problem led to a fall in stock prices, while Amazon.Com Inc took advantage of the situation. Until now, the market capitalization gap between the two has narrowed to 10%.