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Alibaba (BABA) Partners With Douyin to Expand its Customer Base

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Alibaba’s (BABA - Free Report) domestic e-commerce arm, Taobao and Tmall Group, announced a partnership with the Chinese short video platform, Douyin, to launch the "Star Cube Plan."

The "Star Cube Plan," formed by the integration of Alibaba-affiliated digital marketing platform Alimama and Douyin's digital marketing tool Xingtu, will help domestic merchants on Taobao and Tmall platforms to convert Douyin users into active customers.

The merchants can post advertisements on Douyin and track user behavior on their Taobao and Tmall stores after viewing the ads.

Alibaba is expected to boost traffic on its Taobao and Tmall platforms on the back of its latest partnership.

Expanding Collaborations to Aid Customer Base in China

Apart from the Douyin partnership, Alibaba also collaborated with Tencent to enable merchants to place advertisements on the short-video sharing platform, WeChat Channels, which can be connected to Taobao and Tmall shops and live-streaming rooms via Alimama Uni Desk.

The above-mentioned partnerships will help Alibaba in gaining customer momentum in China, particularly for its Taobao and Tmall platforms. This, in turn, will bolster Alibaba’s Taobao and Tmall Group segment, which remains one of the major businesses of the company. Its shares have gained 13.9% in the year-to-date period, outperforming the Zacks Retail-Wholesale sector’s return of 11.2%.

In the fourth quarter of fiscal 2024, the Taobao and Tmall Group segment increased 4% year over year to RMB 93.22 billion ($12.9 billion), which accounted for 42% of the total revenues.

Moreover, the collaborations are expected to aid the company in capitalizing on the growth opportunities present in the China e-commerce market. Per a Mordor Intelligence report, the China e-commerce market is expected to register a CAGR of 11.3% between 2024 and 2029.

Solidifying prospects of Alibaba in the promising China e-commerce market will likely strengthen the company’s overall financial performance in the near term.

The Zacks Consensus Estimate for BABA’s fiscal 2025 revenues is pegged at $137.97 billion, indicating year-over-year growth of 5.7%.

The consensus mark for fiscal 2025 earnings is pegged at $8.26 per share, indicating a year-over-year decline of 4.2%.

However, the Taobao and Tmall Group segment is continuously experiencing sluggish growth due to continued macroeconomic uncertainties and weakening market conditions in China, which remains a major headwind for the company.

Intensifying Competition in China

Alibaba faces stiff competition against some notable industry players like (JD - Free Report) and PDD Holdings (PDD - Free Report) in the China e-commerce space, which remains a concern for the company. recently launched the "Trade-in Alliance for Household Appliances and Home Goods" in collaboration with over 100 brands in a bid to expand trade-in services across China. It also unveiled a "Three Free & Four Unlimited" trade-in service, providing door-to-door pickup, disassembly and handling of old goods with no restrictions on items, and offers discounts with just four clicks.

The company also plans to invest more than one billion yuan in cash incentives and traffic resources to support merchants' growth and innovation. The company will integrate AI-driven solutions into merchant operations, including ChatRhino, an AI-powered platform.

PDD Holdings, on the other hand, is gaining solid customer momentum in the China e-commerce space with its platforms Pinduoduo and Temu.

Earlier, PDD’s Flash sale channel initiative during Singles Day enhanced customer traction on its platform, thereby acting as a growth engine for over 100,000 SME merchants by doubling their sales in over 40 product categories, including agricultural products, national branded products and quality imported goods.

Zacks Rank & A Stock to Consider

Currently, Alibaba carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the same sector is The Gap (GPS - Free Report) , sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Gap has gained 2.8% in the year-to-date period. GPS' long-term earnings growth rate is 12%.

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