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Alibaba (BABA) Puts Stop on Weak-Performing Xiami Service

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Alibaba (BABA - Free Report) takes back its share from the music streaming space by discontinuing its service, Xiami.

From Feb 5 onward, streaming, downloading and giving comments on albums or songs will stop on Xiami, which will be completely shut on Mar 5.

The company already put a stop on membership benefit payments and new digital album purchases. Users have started transferring their music playlists to other streaming services.

We note that the latest move will close Alibaba’s synergies from the promising music streaming market.

However, the move bodes well for the financial performance of the company as Xiami was delivering weak market performance for the past few years.

Journey With Xiami

Notably, Xiami, which was launched in 2008, was acquired by Alibaba in 2013.

The service’s social features, support for indie artists and smart discovery helped the company in gaining solid momentum among customers.

However, soon it started grappling with music rights issues and huge competitive pressure. Xiami’s slowdown began with online music patents, which caused obstacles in its operations.

Further, rising competition from Tencent’s(TCEHY - Free Report) QQ Music, KuGou Music and KuWo remained a major negative.

Tencent continued to witness a significant boost in its market share, while Alibaba’s Xiami faced a decline in the user base and lost large quantities of music rights.

Hence, we believe the latest move will free up Alibaba’s resources, which can then be utilized in business diversification to earn good returns in the days ahead.

This, in turn, will instill investor optimism in the stock in the near term.

Wrapping Up

The closure of Xiami comes on top of the company’s current issues, which majorly include theprobe announced by China’s State Administration for Market Regulation (“SAMR”) to look into its unhealthy business practices.

Nevertheless, the company’s strong fundamentals are expected to continue driving the momentum across its operating fields.

Alibaba’s e-commerce strength will remain one of its major driversin the near term as well as in the long run, owing to its strengthening IoT capabilities and aggressive international expansion strategies.

Moreover, its persistent efforts to add value to consumers and sellers through the consumer segment, product enrichment, and platform innovations remain major positives.

Further, the company’s robust cloud business, which emerged as a major contributor to top-line growth, remains noteworthy.

Zacks Rank & Stocks to Consider

Currently, Alibaba carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the retail-wholesale sector are Qurate Retail Group, Inc. (QRTEA - Free Report) and The Childrens Place, Inc. (PLCE - Free Report) . Both the companies carry a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term earnings growth rates for Qurate Retail Group and The Childrens Place are currently pegged at 5.4% and 8%, respectively.

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