Alibaba's Market Value Surpasses Walmart, Making It World's Biggest Retailer

50 percent of a big number is a big number. Alibaba has surpassed Walmart as the world’s biggest retailer, at least as far as market value is concerned. But that development, however brief it may be signals expectations regarding ecommerce and China.

Analysts believe that 50 percent or more of the Chinese population will be shopping on Alibaba in the next decade. That, in itself, would be enough to generate significant growth prospects. But the fact that Alibaba may roll its model out in other countries underscores the degree to which this could challenge not just Walmart, but Amazon.

It also illustrates the problem that Walmart faces in regaining investors and customer’s confidence. The Walmart approach is physical and it requires sustaining a massive installed base. The question is not so much whether Alibaba can adapt to a global market, but whether Walmart can change its operating philosophy to reflect evolving demographics, declining (or plateauing) US household incomes and the growing importance of ecommerce not just as an add-on but as a central focus. JL

Eric Platt reports in the Financial Times:

“China’s changing internet user demographics and mobile development support our favourable view on ecommerce for the next decade,” Cynthia Meng, an analyst with Jefferies, said. “We estimate well over half of the Chinese population will be shopping on Alibaba’s platforms in 10 years.”Alibaba, the Chinese ecommerce behemoth that listed in New York last month, briefly muscled ahead of Walmart by one important measure on Tuesday, when its market valuation surpassed that of the world’s largest retailer by revenues.

Shares of Jack Ma’s Hangzhou-based group climbed as much as 2.8 per cent to touch a new record high of $100.50, lifting its market capitalisation above $247bn.

At that level, Alibaba was just $2bn short of the list of the world’s 10 most valuable companies, within reach of Swiss pharmaceutical groups Roche and Novartis. Alibaba would have reshuffled the coveted top 10 had it not been for better than expected third-quarter results from Novartis.

Alibaba’s stock closed at $99.68, trimming its market value to $246bn, a few hundred million dollars behind Walmart.

Walmart, with 11,000 stores in 27 countries including China, reported revenues of $473bn for its past financial year, compared with the $8.6bn Alibaba collected from its online marketplaces.

The gains on Tuesday follow comments from Mr Ma, the company’s founder and executive chairman, who told a conference on Monday evening that he was interested in working with Apple on financial payments.

Alibaba floated in New York on September 19, the day that remains the peak for US equity markets and preceded a near correction in the benchmark S&P 500 index.

Its shares, which were priced at $68 apiece, rallied 38 per cent on their debut day, as underwriters took hours trying to match orders amid heavy demand. Alibaba eventually opened for trading on the New York Stock Exchange at $92.70 and touched a brief high of $99.70.

Over the past two weeks, several Wall Street analysts have unveiled their targets and ratings for Alibaba. The company has received a warm reception, with more than three-quarters of brokerages recommending the stock as a ‘buy’.

Jefferies, which initiated coverage on Monday, said it expects Alibaba to remain the dominant online retailer in China over the next decade.

“China’s changing internet user demographics and mobile development support our favourable view on ecommerce for the next decade,” Cynthia Meng, an analyst with Jefferies, said. “We estimate well over half of the Chinese population will be shopping on Alibaba’s platforms in 10 years.”

Revenues are expected to reach Rmb130.5bn ($21.3bn) in 2017, a 149 per cent rise from fiscal 2014 levels, according to analyst forecasts collected by Bloomberg. In contrast, Walmart’s sales are projected to climb 7 per cent over a similar period to $522bn.

The many banks that underwrote the record $25bn offering are still restricted from commenting on the company. But that lock-up period, which will end in the coming days, may fuel additional movement in the shares ahead of Alibaba’s quarterly results next week.