News of China’s economic stimulus has given Chinese equities a spike this week with Alibaba turning heads once again. Alibaba’s stock has soared +14% this month, leading to a +30% gain for the year, edging out American e-commerce giant Amazon by +25%.
Both e-commerce behemoths have shown strong momentum in September, making it a compelling discussion piece on which stock may be the better buy. Noteworthy, the Zacks Internet-Commerce Industry ranks in the top 27% of over 250 Zacks industries.
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Amazon: The Growth Investors’ Darling
Amazon’s growth trajectory appears impressive, with annual earnings projected to surge by 63% in fiscal 2024 to $4.74 per share, compared to $2.90 in FY23. Additionally, FY25 EPS is forecasted to increase by 23%.
Amazon Web Services (AWS) has been a major driver of the company’s expansion, with total sales estimated to hike by over 10% in both FY24 and FY25, climbing towards the $700 billion mark. As the world’s largest cloud provider, AWS segment sales rose by 18% during Q2, reaching $26.28 billion.
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Conversely, Alibaba has diversified operations beyond e-commerce, including cloud computing, but its earnings growth has decelerated in recent years. In FY25, Alibaba’s EPS is projected to rise by around 1% compared to virtually no change in FY26, expected to reach $8.74 per share. However, the company’s top line is forecasted to grow by 7% in both FY25 and FY26, with sales estimates nearing $150 billion annually.
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Value Investors Lean Towards Alibaba
Despite Amazon’s promising growth prospects, value investors may find Alibaba’s stock more appealing. Despite the recent rally, Alibaba trades at just 10.9X forward earnings, a significant discount compared to the industry average of 28.7X. Conversely, Amazon sits at a 40.5X forward earnings multiple, showcasing a premium over the S&P 500’s 24.2X.
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Moreover, Alibaba’s price-to-sales ratio is less than 2X, while Amazon’s stands at 3.1X.
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Balance Sheet Face-Off
Looking at the balance sheet, Amazon boasts $89 billion in cash & equivalents at the end of Q2 2024, while Alibaba holds $68 billion.
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In terms of total assets, Amazon records $554.81 billion, with $318.37 billion in total liabilities. On the other hand, Alibaba reports $245.63 billion in total assets, compared to $102.18 billion in total liabilities.
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The Verdict
Currently, both Alibaba and Amazon stock carry a Zacks Rank #3 (Hold). Amazon proves attractive to growth investors, while value investors may gravitate towards Alibaba. With recent surges in e-commerce stocks, there might be better buying opportunities on the horizon, although both remain strong long-term investments.
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