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Alibaba (BABA) Raises Funds to Boost Worldwide Presence

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In a bid to boost its presence in the global payment sector, Ant Financial, an affiliate of Alibaba Group Holding Limited (BABA - Free Report) recently raised $14 billion in Series C funding.

Many leading investors participated in this round. This shows that Ant Financial that operates China’s most popular payment platform, Alipay, has the potential to offer significant high returns on their investments.

Some of the investors that participated in the funding include Warburg Pincus, GIC, Temasek, Canada Pension Plan Investment Board, Silver Lake, General Atlantic and Carlyle Group to name a few.

The investment will help the company to focus on the advancement of Alipay and its other financial services. This is expected to drive the adoption rate of these services and apps, thus driving its top line.

Expanding Globally

Alibaba’s fund raising strategy bodes well for its global expansion plans. At present, the company has 870 million customers in the global payment market.

Per Bloomberg, the company will get support from Temasek’s participation, which will help it to extend Alipay’s reach outside China.

Ant Financial has already made investments in Thailand, Korea, Indonesia, Hong Kong, Malaysia, the Philippines, Pakistan, Bangladesh and India.

Recently, the company announced the acquisition of 20% stake in bKash, a Bangladesh-based mobile financial services provider, which bodes well for its international expansion. Additionally, its tie-up with Pakistan-based Telenor Group to acquire 45% stake in Telenor Microfinance Bank led to the expansion of Alipay in Pakistan. Also, the company has teamed up with Paytm, the online payment company of India.

Further, Alibaba extended its partnership with First Data for the deployment of Alipay at the latter’s point-of-sale across North America.

Coming to price performance, shares of Alibaba have returned 46% in a year, marginally underperforming the industry’s rally of 46.9%.

However, we believe the growing popularity of Alipay across the world along with the world’s largest money market fund, Yu’e Bao, which is owned by Ant Financial, will continue to benefit Alibaba.



Intensifying Competition

The online payment market is being driven by increasing use of Internet and smartphones across the world and this has led to the emergence of mobile wallet.

Per a report from Zion Market Research, the global mobile market is expected to witness CAGR of 32% between 2017 and 2022 to reach $3.14 billion.

With the immense growth opportunities in the online payment sector in the fast moving world, many tech companies are trying to reap benefits from this sector. Some major players in this market are Alibaba, Alphabet’s (GOOGL - Free Report) Google, Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) .

Alibaba holds a dominant position in China’s e-commerce as well as payment services market. Its Alipay remains a tough competitor for Apple Pay, Google Pay and Amazon Pay.

The recent funding raised by Alibaba to aid the expansion of its financial services in the international market will intensify the competition further and will benefit the company’s position.

Currently, Alibaba carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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