In this article I will provide a look into Amazon (NASDAQ:AMZN) from the United States and Alibaba (NYSE:BABA) from China from a purely fundamental perspective. BABA and AMZN are two of the largest e-commerce companies in the world and the biggest cloud computing providers in their respective domestic markets. I believe both companies are undervalued and present a long-term investment opportunity, based on fundamentals.
Please find below a comparison of the companies´ financial metrics during the trailing twelve months:
As presented in my previous article about Meta Platforms (META) and Tencent (OTCPK:TCEHY) as well as in the article about Baidu (BIDU) and Alphabet (GOOG) (GOOGL), I also take a look at R&D spend and share buybacks. It is important to look how much BABA and AMZN are investing in innovation and their platforms as well as how much they are spending to repurchase their common stock and decrease the number shares of outstanding in the open market. Important to note here that both companies have seen their value significantly decrease during 2022.
Examining AMZN and BABA Fundamentals and Growth Potential
As we all know AMZN is the biggest e-commerce company in the United States and the leading cloud computing player in the world. The company has seen a drop in its market valuation since it had its eyes set at $2 trillion, the drop has been significant and is now trading at a market valuation of $878 billion. AMZN is able to generate a strong cash flow from operations at $40 billion which during the last twelve months the company had to spend purchasing property and equipment which has now ballooned to $66 billion during the last twelve months. AMZN has always invested its resources to reap benefits at a later stage, we can just take a look at its AWS business, which has over 30% market share in the global cloud market. This market has now surpassed the $200 billion mark during 2022.
Another example of AMZN investment strategy is its R&D spend which is substantially higher than most tech companies. AMZN spent a whopping $66 billion in R&D expenses during the last twelve months. It is because of this investment mindset of the management that AMZN has a dominant position in the e-commerce, cloud computing, and video streaming markets. AMZN is now making strong investments and looking to become a dominant player in other market such as the on-demand streaming services market which is forecasted to reach the $330 billion mark by 2030.
Fundamentally, AMZN …….