Photo credit: ALBERTO PIZZOLI/AFP/Getty Images
Botticelli’s "Birth of Venus," an overscaled 1482 painting on canvas, surely ranks among the most beautiful creations ever done. Alas, when you stand close to this piece hanging in the Uffizi Gallery, you begin to denote imperfections that raise questions.
I feel the same way about Alibaba, which birthed itself in the investment world like Venus, already radiantly fully formed. With hundreds of millions of active consumers, irrepressibly growing revenues and earnings momentum year-over-year doubling, Alibaba, too, made a big splash going public.
Ironically, this birth was not blessed by our SEC, which wanted more data breakdown. BABA is not part of the Standard & Poor’s 500, and therefore not owned by index funds tracking the S&P 500. BABA has nearly doubled this year, its market capitalization pushing $450 billion. The S&P 500 would be at least 1% higher year-to-date inclusive of BABA.
Just as the SEC was flawed in what seems to me the most exciting property I’ve ever surveyed and owned, I detect some flaws up close in the Birth of Venus canvas. One of Venuss hands is awkwardly delineated, not fully formed. Whats more, one of her feet is blobby, defined sketchily. The word out is some of Botticellis students painted parts of this picture. Some academics believe the painting is hardly Botticelli’s work at all.
Maybe this piece came out of a workshop setting, but its conception has to be solely Botticellis. Consider, Venus arrives on shore fully formed from the sea. She is riding a gigantic seashell, comparable, you could say, with a platform raft. Her thick, honey-colored hair winds about her nude torso encircling one leg. Obviously, no hairstylist has touched her.
Venus is ethereal, a radiant figure, but her face has a masklike look to it. The fully dressed young woman at her side is more beautiful and painted in detail. She is about to wrap a flowered robe around Venus’ nudity.
To read Alibaba’s June quarterly financials is to be overwhelmed by the magnitude of its cascading metrics, inclusive of revenues, net income, adjusted Ebitda, mobile active users at 529 million and the segmentation of revenues covering eight operating categories. Then, throw in cloud computing, digital media and entertainment. The impression is like Amazon, a blitzkrieg of initiatives.
Unlike Amazon, BABA is a very profitable operation. Amazon is unanalyzable, an act of faith, that there will be a bottom line sooner rather than later in its online commerce business.
Alibaba is nearly as difficult to model as Amazon. Not because it’s close to unprofitable but because it seems too profitable, with outsize revenue momentum. Core commerce rose 56% in the June quarter, a $25 billion business, not exactly a pushcart operation.
Management doesn’t give you any help in modeling future years. All this reminds me of Polaroid and Xerox in their heyday 50 years ago. Edwin Land at his Polaroid show-and-tell sessions unveiled new products – like color film. The market went crazy.
Apple’s headman, Steve Jobs, copied Lands presentation format in his unveiling sessions for cell phones and iPads. Joe Wilson at Xerox told analysts to do their own homework. I remember modeling their 914 copier, a great product. I figured out how many offices in the country could rent one, and then multiplied by 5 cents a copy page.
Alibaba is better situated than the old Polaroid and Xerox, both bypassed by new technology. Who’s going to make an end run around BABA? Yes, there’ll be more competitors, but right now they can’t upend BABA in online retailing.
My quarrel with BABA is they’ve drowned me in numbers. It’s as if Jack Ma told his CFO to give the SOBs every stat from every category you can think of in delineating our achievement. Let em do their own modeling. Not our job.
Nobody ever called Edwin Land Ed. He was Dr. Land to his Polaroid people and shareholders. At Xerox, I was on friendly terms with its CFO, Kent Damon. What I like about BABA is its key people are facile in English, starting with Jack Ma. Theres a Maggie and a Daniel. How many M.B.A.s from Stanford? How much will they tell us, or even steer us in the right direction?