Alibaba’s BABA logistics arm Cainiao announced the launch of a "consolidated shipping" service in the United States, bolstering its overseas logistics offerings. The cross-border service packages multiple shopping orders from various Chinese e-commerce platforms and delivers them to U.S. customers via air and sea transport routes, reducing delivery times to as little as five days. Further, these consolidated orders are placed in a warehouse before being shipped from China. Alibaba is expected to gain solid traction among Chinese customers residing in the United States on the back of its latest move. Moreover, Cainiao will likely gain strong momentum among various Chinese e-commerce companies.
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The company’s expanding cross-border logistics services will, in turn, bolster its overall logistics services portfolio. Apart from the latest launch in the United States, Alibaba’s Cainiao offered consolidated shipping to Chinese shoppers in overseas markets, such as Hong Kong, Singapore and Australia. The company also launched Cainiao Express, a new express delivery service, aiming to offer doorstep deliveries, half-day, same-day and next-day, expanding from the previously provided services to select Alibaba-owned businesses. Moreover, Alibaba reportedly made a $57 million bid to acquire Chinese logistics company Best, which has a strong market base in Southeast Asia. All the above-mentioned endeavors are expected to further strengthen Alibaba’s Cainiao Smart Logistics Network business unit. In the second quarter of fiscal 2024, the unit generated sales of RMB 22.8 billion ($3.1 billion), exhibiting year-over-year growth of 25%.
The company’s growing logistics portfolio will likely aid the company in capitalizing on the growth opportunities present in the global logistics market. Per an Allied Market Research report, the global logistics market is expected to reach $16.79 trillion by 2032, indicating a CAGR of 5.6% between 2023 and 2032. Solidifying the prospects of Alibaba in the promising logistics market will likely strengthen the company’s overall financial performance in the near term. The Zacks Consensus Estimate for BABA’s fiscal 2024 revenues is pegged at $133.01 billion, indicating year-over-year growth of 5.52%. The Zacks Consensus Estimate for earnings is pegged at $9.12 per share, indicating year-over-year growth of 14.86%. Moreover, the latest U.S. expansion will allow Alibaba to compete well with industry players like Amazon AMZN, which is also making continuous efforts to strengthen its presence in the logistics market. Amazon launched Amazon Shipping, a ground shipping service for sellers, offering delivery on orders on Amazon.com, sellers' websites, and other channels, covering domestic shipments within the United States. The company also introduced an end-to-end supply chain service called "Supply Chain by Amazon," allowing third-party sellers to pick up inventory, ship across borders, handle customs clearance, store bulk inventory and deliver to customers.
Currently, Alibaba carries a Zacks Rank #3 (Hold). BABA shares have lost 37.4% over the past year, underperforming the Zacks Retail-Wholesale sector’s return of 15.8%. Some better-ranked stocks in the same sector are The Gap GPS and Expedia Group EXPE. While The Gap currently sports a Zacks Rank #1 (Strong Buy), Expedia carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here. The Gap has gained 70.5% over the past year. GPS' long-term earnings growth rate is 12%. Expedia's shares have rallied 53.9% over the past year. EXPE's long-term earnings growth rate is 25.31%.
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