Amazon or Alibaba? Plus Visa, MasterCard, PayPal and Alphabet
The earnings parade as we started to note earlier is pretty big this week, and there plenty of additional companies reporting like Alibaba, Visa, MasterCard, Alphabet, and PayPal. But there is so much more to these companies than just earnings. Let’s explore
Alibaba or Amazon?
Alibaba shares have soared by nearly 100 percent over the past 52-weeks, and the stock just continues to run higher. Alibaba is the Amazon.com that tries to make a profit. Analysts are looking for the company to earn $1.66, on revenue of $12.24 billion in its fiscal third quarter.
It is incredible when you compare Amazon and Alibaba because Amazon’s revenue is more than five times that of Alibaba, but Alibaba’s operating income is nearly three times more than Amazon’s. A surprising fact that seems so unbelievable. Look at the chart below; Amazon has had revenue of over $161 billion over the trail-twelve-months to Alibaba’s near $29 billion, but Alibaba has created operating income of almost $9.5 billion, vs. Amazon’s $3.23 billion.
If you had to choose from a fundamental standpoint, Alibaba is the better choice of the two companies.
Visa and MasterCard
Visa and MasterCard have risen by over 50 percent each over the past 52-weeks, and both are up over 10 percent since the start of 2018. The rise in both stock is likely on the heels of a strong holiday season.
Analysts are looking for Visa to report revenue of $4.891 billion and earnings of $0.98, while MasterCard is expected to report revenue of $3.254 billion and earnings $1.12. Both stock trade with PE multiples in the mid-20’s.
I remember a few years back, I was at some investor conference, and I was telling another investor/analyst about owning Visa and Mastercard, and him going off on a tangent and telling me about how expensive the stocks were.
I just looked at him and said I have five bucks in my pocket, and I have these, showing him my debit and credit cards. I told him you couldn’t value something that has never happen in the history of the world, as people move from cash to a cashless society.
I’d gladly pay in the mid-20’s for either of these companies, in fact, I have a few years back, and presently. It is just this simple, how much cash do you carry in your pocket, and how many transactions do you make online? Every time you swipe, tap, insert, or click that Visa or MasterCard guess who makes money? They just sit there and collect the toll, like when you go over the George Washington bridge after sitting in traffic for 2 hours on the cross Bronx express. It is really is that simple.
You can begin to think of PayPal the same way as well, and to think Elon Musk was part of the early days of that company too. Now analysts are looking for them to earn $0.52 on revenue of $3.634 billion when they report results.
Finally, we will touch on Alphabet, but there is not much here to talk about. Analysts are looking for Alphabet to earn $9.98 on revenue of $31.86 billion. Alphabet is the dominant force in search and online advertising.
Have you thought about how many times a day your daily interactions touch an Alphabet product? I have, and it is amazing how engrained Alphabet is in my life. For Alphabet, it may just be that simple as well.
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Michael Kramer and the clients of Mott Capital own shares of V, MA, GOOGL
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