Alibaba - Adjusting My Intrinsic Value Calculation

Sven provides a critical analysis of Alibaba following its recent earnings report, highlighting a concerning shift in the company's business model. Sven points out that while the company reports growth in cloud and AI, its core international e-commerce growth has stagnated at a mere 1%. Sven expresses concern over the company's financial health, noting that cash reserves have plummeted from $60 billion to $30 billion due to heavy capital expenditures and negative cash flows. Sven observes that Alibaba is cutting share repurchases to fund aggressive investments in AI, which Sven views as unproven promises rather than reliable value creation.

Sven emphasizes that Alibaba has failed to deliver meaningful results over the last six years, echoing Charlie Munger’s sentiment that it remains 'a goddamn retailer' rather than a high-growth tech giant. Consequently, Sven has adjusted his valuation models, significantly lowering the expected earnings per share. Sven concludes that the stock lacks a margin of safety at current levels and suggests that a price around $60 would be a more appropriate entry point to align with the company's book value.