Alibaba Group Holding (9988. HK) operates business-to-business and consumer-to-consumer e-commerce, mobile payment, logistics, and cloud infrastructure services. Its Youku and Tudou video streaming platforms are among the most popular in China. The company also produces movies, television dramas, and other cultural content.
The company is reportedly exploring options for its Youku and Tudou video platforms to expand its business scope and boost shareholder returns. One option under consideration is injecting the assets into Alibaba Pictures Group Ltd (1060. HK), a Hong Kong-listed firm already involved in film and TV production. The move would help the diversified Alibaba group compete with China’s most extensive entertainment companies.
Shares of Alibaba Pictures have soared by nearly 198 percent this year, outpacing the city’s benchmark Hang Seng Index’s rise of about 17 percent. The rally was sparked by the news that the firm has signed a deal to supply its dramas and movie library to Youku, China’s dominant online video platform.
According to the firm’s filing, the deal could bring in more than 700 million yuan ($102.5 million) of revenue this year. It also said it expects the partnership to expand to other platforms in the future. The partnership signifies the burgeoning demand for video streaming in China as consumers seek more immersive content to satisfy their thirst for social media and entertainment.
In its filing, Alibaba said the collaboration with Youku and Tudou will help it foster innovation and efficiency. It will allow Alibaba to leverage data from Youku and Tudou users to provide a more personalized experience for its customers, the filing added. The deal will also allow Alibaba further to develop its cloud computing and artificial intelligence capabilities.
Investors should avoid buying into the recent rally because the stock trades significantly below its intrinsic value. The company’s latest annual report says the stock is also prone to volatile trading due to geopolitical tensions and other macroeconomic factors.
Institutional investors have a significant stake in the company’s shares. However, it’s worth noting that they are sometimes wrong and can sometimes make bad bets. Therefore, investors should always conduct their own research and use this information to develop an investment strategy that best suits their risk profile.
