Contrasting Alibaba Group (BABA) & NetEase (NTES)

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Alibaba Group (NASDAQ: NTES) and NetEase (NASDAQ:NTES) are both large-cap retail/wholesale companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, risk, earnings, profitability, analyst recommendations and valuation.

Analyst Ratings

This is a breakdown of current recommendations for Alibaba Group and NetEase, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alibaba Group 0 0 27 1 3.04
NetEase 1 4 10 0 2.60

Alibaba Group currently has a consensus target price of $231.35, indicating a potential upside of 40.43%. NetEase has a consensus target price of $321.25, indicating a potential upside of 59.09%. Given NetEase’s higher probable upside, analysts plainly believe NetEase is more favorable than Alibaba Group.

Earnings and Valuation

This table compares Alibaba Group and NetEase’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Alibaba Group $39.90 billion 10.58 $10.22 billion $4.03 40.88
NetEase $8.32 billion 3.19 $1.65 billion $12.41 16.27

Alibaba Group has higher revenue and earnings than NetEase. NetEase is trading at a lower price-to-earnings ratio than Alibaba Group, indicating that it is currently the more affordable of the two stocks.

Dividends

NetEase pays an annual dividend of $2.43 per share and has a dividend yield of 1.2%. Alibaba Group does not pay a dividend. NetEase pays out 19.6% of its earnings in the form of a dividend. NetEase has raised its dividend for 2 consecutive years.

Insider & Institutional Ownership

38.7% of Alibaba Group shares are held by institutional investors. Comparatively, 45.8% of NetEase shares are held by institutional investors. 12.5% of Alibaba Group shares are held by company insiders. Comparatively, 54.7% of NetEase shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility & Risk

Alibaba Group has a beta of 2.4, meaning that its share price is 140% more volatile than the S&P 500. Comparatively, NetEase has a beta of 0.8, meaning that its share price is 20% less volatile than the S&P 500.

Profitability

This table compares Alibaba Group and NetEase’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alibaba Group 20.57% 14.18% 8.61%
NetEase 11.49% 14.57% 9.22%

Summary

Alibaba Group beats NetEase on 10 of the 18 factors compared between the two stocks.

About Alibaba Group

Alibaba Group Holding Limited, through its subsidiaries, operates as an online and mobile commerce company in the People's Republic of China and internationally. The company operates in four segments: Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives and Others. It operates Taobao Marketplace, a mobile commerce destination; Tmall, a third-party platform for brands and retailers; Rural Taobao program that enables rural residents and businesses to sell agricultural products to urban consumers; Juhuasuan, a sales and marketing platform for flash sales; Alibaba.com, an online wholesale marketplace; Alitrip, an online travel booking platform; 1688.com, an online wholesale marketplace; AliExpress, a consumer marketplace; and Hema, a proprietary grocery retail format. The company also provides pay-for-performance and display marketing services through its Alimama marketing technology platform; and Taobao Ad Network and Exchange, a real-time bidding online marketing exchange in China. In addition, it offers cloud computing services, including elastic computing, database, storage and content delivery network, large scale computing, security, and management and application services, as well as big data analytics and a machine learning platform through its Alibaba Cloud Computing platform; Web hosting and domain name registration services; and payment and escrow services, as well as develops and operates mobile Web browsers. The company provides its solutions primarily for businesses. Alibaba Group Holding Limited has strategic collaborations with Driscoll's and Thai Union/Chicken of the Sea to launch their food products to China; and a collaboration agreement with The Hong Kong Polytechnic University. The company was founded in 1999 and is based in Hangzhou, the People's Republic of China.

About NetEase

NetEase, Inc. operates an interactive online community in the People's Republic of China. The company operates through Online Game Services; E-Commerce; Advertising Services; and Email and Others segments. It offers various games in a range of genres through mobile devices and PCs, including role playing games, MMORPGs, battle arena games, simulation games, collectible card games, first-person shooter games, sandbox games, and other types of games to the Chinese market. The company also operates Kaola that sells imported maternity and baby products, skincare and cosmetics, and other general merchandise; and Yanxuan, which sells its private label products, including apparel, homeware, kitchenware, and other general merchandise, as well as NetEase News App and NetEase Websites, which provide Internet users with Chinese language-based online services that are centered around content and interactive community. In addition, it provides online advertising services comprising banner advertising, channel sponsorships, direct email, interactive media-rich sites, sponsored special events, games, contests, and other activities; and email services to individual and corporate users. Further, NetEase, Inc. offers online services, such as CC, a live video streaming platform; Cloud Music, a music streaming platform; Wangyibao, a payment platform; EaseRead, an e-reading platform; NetEase Cloud Classroom, an online education platform; and Youdao Dictionary, an e-dictionary services platform. The company was formerly known as NetEase.com, Inc. and changed its name to NetEase, Inc. in March 2012. NetEase, Inc. was founded in 1997 and is based in Beijing, the People's Republic of China.

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