Alibaba (BABA) to Invest in Yunda, Enhance Delivery Services

Zacks Equity Research

Alibaba Group Holding Limited BABA is leaving no stone unturned to bolster presence in the retail sector with robust delivery networks.

The company plans to buy at least a 10% stake in a China-based courier firm, Yunda Holding Co Ltd., per reports.

This is likely to strengthen Alibaba’s e-commerce business. Additionally, it will benefit China’s logistic industry and the rapidly growing retail sector.

Express Delivery Industry Growth

Express delivery refers to fast delivery of goods to customers through railway, road or air transport within 24-72 hours.

Express delivery facilities are used by different industries such as electronics and electricals, textile and clothing, automotive and transport, manufacturing, pharmaceuticals, financial services and e-commerce, along with individual customers for their personal work.

Per data from the State Post Bureau, China-based delivery firms handled a total of 63 billion parcels in 2019, up 24% year over year, while their revenues grew 23% year over year to 745 billion yuan ($104.95 billion).

Major players operating in the China express delivery market include ZTO Express, YTO Express, Best Inc., STO Express and SF Express.

Buying a stake in Yunda will enable Alibaba to expand share in China's fast-growing express delivery industry. In addition, this will likely help the company in bolstering the ‘New Retail’ strategy that focuses on integration of online e-commerce and offline retail by leveraging the comfort of e-commerce, and advantages of mom & pop shops. This will also improve customer engagement and build an efficient retail ecosystem. Moreover, it will help Alibaba gain momentum in the retail and e-commerce market of China.

Notably, an improved delivery network bodes well for New Retail’s increasing demand for faster delivery and logistics services.

Alibaba Group Holding Limited Price and Consensus

 

Alibaba Group Holding Limited Price and Consensus

Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote

Focus on Logistics

Alibaba is pushing deeper into the logistics sector on account of improvement of delivery services. The anticipated move will reinforce its footprint in the logistics industry.

This will mark the company’s fifth investment in the delivery services sector. Previously, it invested in STO Express, ZTO, YTO Express Group and Best Inc.

All these endeavors will help the company build a more advanced delivery and logistics network to meet the growing demand in the retail and e-commerce sector of China.

According to a report from Forrester, the online retail market in China is anticipated to reach $1.1 trillion in 2019 and $1.8 trillion within 2022, driven by growing mobile use.

This in turn is likely to boost the competitive position of Alibaba against its biggest rival in China, JD.com, which is also spending heavily on logistics.

Zacks Rank & Other Stocks to Consider

Currently, Alibaba carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Stamps.com Inc. STMP, eBay Inc. EBAY and Fiverr International Lt. FVRR. While Stamps.com sports a Zacks Rank #1 (Strong Buy), eBay and Fiverr International carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Stamps.com, eBay and Fiverr International is currently projected at 15%, 11.6% and 44.2%, respectively.

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