India: The Historic Surge Happening Now

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  • BABA delivers for those that bought the dip
  • 16 million people a month join the internet in this country alone
  • Plus, stocks are moving…to the upside!

Perhaps things out there in China aren’t quite as bad as everyone presupposes.

I told you last week we’d have a clue on this thanks to Alibaba Group Holding Ltd [NYSE:BABA].

This internet behemoth released its quarterly earnings report overnight (our time).

Today’s Profit Watch digs in for a look…and explains why the future is so bright.

Let’s look back for a moment.

In October last year I made the following comment…

Nobody is more astonished than me to see Alibaba [NYSE: BABA] back trading under US$150.

It still looks like an opportunity to accumulate it to me.’

The idea in that article was Alibaba is a stock you can sock away for the next decade.

We can’t know what the future holds for China’s economy. There’ll be dips, booms and crisis over a long enough period.

But we DO know a huge surge of Chinese consumption is happening as middle class incomes rise and is of historic proportions.

It’s been a bumpy ride since for the stock. Alibaba hit around US$130 in November, December and early January.

I pointed out last week Alibaba was beginning to rally.

Alibaba last closed at US$166 to finish the US session. It jumped 6% on the earnings result. They weren’t as terrible as some had expected.

In fact, when you consider that the company has a US$430 billion market cap, they’re still impressive.

Alibaba’s revenue from its core commerce division rose 40%. Cloud computing was up 84%.

Its active consumers increased by 35 million to a total of 636 million.

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These are large numbers. Admittedly this revenue growth is the slowest in nearly three years.

But what other kind of company can add that many users in a quarter?

It’s more people than live in Australia!

Keep watching Alibaba’s quarterly results for your market guide to China’s economy.

Even ‘only’ a 6% growth rate in China now adds a trillion in new consumption.

An interesting point from the earnings report is that 70% of Alibaba’s growth in active users came from the third-tier (and below) Chinese cities.

That suggests it’s bringing in more of the rural Chinese into the internet economy.

Over the long term this looks bullish for the world. And we can see it happening elsewhere too…

A cool 16 million people a month join the party…

I was perusing The Economist last night. There was a very telling report on Indians going nuts for the internet.

Just three years ago there were 125 million broadband connections in India. Now there are 512 million.

New connections are growing at 16 million per month.

An India firm called Reliance Industries launched a brand called Jio that now has 280 million users.

Cheap phones are penetrating across the entire economy and bringing millions of new viewers, readers and listeners to any company that can reach them. 

Think of the implications. An American firm like Disney [NYSE:DIS] can license its back catalogue of films to a massive new audience.

YouTube gets millions more views — and they’re already astonishing. Great for Alphabet Inc [NASDAQ:GOOG].

This is huge scope for firms like this to grow earnings away from their traditional market.

Millions of Indians will get greater access to banking and finance.

And just wait while astonishing power of education spreads across Indian society.

Who knows what new ideas and innovation unique to India will spring from this?

I find it hard to be bearish about the world with two giant economies integrating into the global economy like this over the next decade.

Look at Boeing [NYSE:BA]. It just released its latest numbers too, posting record revenues and profits.

The stock flew up on the news.

Soaring demand for air travel and cargo means it expects sales to rise 10% this year as well.

There’s a lot more positive sentiment around the markets right now compared to December.

This is flowing back to the Australian market.

I’m starting to see stocks in the small-cap sector beginning to rumble too.

There are plenty of opportunities to make money in stocks. Don’t let the permanent doomer crowd stop you from taking advantage of them.

Cheers,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

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