Alibaba Group Holding Ltd., the longtime titan of the Chinese e-commerce space, briefly ceded its top position to Pinduoduo ( PDD ), an eight-year upstart, marking a major shift in the industry, according to Bloomberg reports.
The brief change in the stock’s positions occurred during Thursday’s (November 30) trading session, where Alibaba’s market value slipped below that of PDD. This is a major turnaround for an industry that Alibaba once dominated for more than a decade.
Fluctuations in market valuation
During Hong Kong intraday trading, Alibaba experienced a 1.4 percent decline, causing its market value to briefly fall to about $187 billion, momentarily putting it below US-listed PDD Holding’s valuation of $188.3 billion, Bloomberg reported.
But the Jack Ma co-founded e-commerce giant managed to rally later in the day, closing slightly higher than PDD’s overnight market capitalization.
The surprising change signifies the difficult times Alibaba is facing since Beijing’s 2020 crackdown on the technology sector, affecting Alibaba’s trajectory significantly. Further, the emergence of disruptors such as PDD and ByteDance Ltd., in the social media and e-commerce landscapes, has added to Alibaba’s challenges.
Jack Ma’s address to employees
In a recent internal memo, Ma urged the company’s massive workforce to recalibrate and regain lost momentum. “Every great company is born in winter. The people who want to reform for the future and the organizations who are willing to pay any price and sacrifice are the ones who are truly respected,” Ma wrote in an internal forum.
Ma also praised rival PDD for “decision-making, execution, and efforts of the past years”.
The co-founder has been lying low since government action and it’s still unclear if his public speaking has been approved. However, the unusual intervention of the billionaire highlights the severity of the situation and the need for the company to quickly adapt to the evolving market dynamics.
Ma’s call for change underscores the urgency for Alibaba to reorient itself amid intensifying competition. The shift in market dynamics suggests a compelling need for Alibaba to innovate and adapt as rivals like PDD redefine the e-commerce landscape.
Industry Outlook
Wall Street reacted to these developments by issuing a rare downgrade on Alibaba’s shares, with Morgan Stanley adjusting its rating and target price to $90 from $110. Meanwhile, PDD’s robust growth, fueled by robust growth and aggressive global expansion, positions it as a number one in Chinese e-commerce.
Overall, brokers are bullish on Alibaba. It still has 44 buy ratings and 8 hold recommendations, compared to 52 buys for PDD and 3 holds for PDD.
Alibaba is facing internal restructuring challenges, including breeding spin-offs and leadership transitions. In contrast, PDD’s strategic prowess, exemplified by the success of its US shopping app Temu and domestic market innovations, presents a formidable challenge to Alibaba’s once-dominant position.
The PDD founded by Colin Huang has seen growth far outpace Alibaba, gaining a 20 percent increase in transactions against rivals during the recent Singles Day shopping festival in China. In the US as well, Temu has surpassed Shein in online sales marking itself as a disruptive force in the global e-commerce space.
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Updated: 01 Dec 2023, 13:50 IST