Alibaba Leads Investment In ZTO, Enhances Delivery Services

 | May 29, 2018 09:46PM ET

Alibaba Group Holding Limited (NYSE:BABA) is leaving no stone unturned to bolster its presence in the retail sector with robust delivery networks. Recently, the company has led a consortium of investors to invest $1.38 billion in a China-based express delivery company, ZTO Express (Cayman) Inc. (NYSE:ZTO) .

The consortium includes Alibaba, Cainiao Smart Logistics Network and other undisclosed investors. Per the deal, 10% of ZTO will be acquired by the investors in exchange for the investment.

The latest move of the company is likely to enhance its offline services and strengthen e-commerce business with faster delivery services.

Coming to the price performance, shares of Alibaba have returned 61.7% over a year, outperforming the Alibaba Group Holding Limited Quote

Focus on Logistics

Alibaba’s focus on improvement of its delivery services is pushing it deeper into the logistics sector. The latest deal reinforces its footprint in the logistics industry.

This investment marks the company’s third in delivery services sector. Before ZTO, the company invested in YTO Express Group and Best Inc.

Further, Alibaba acquired a majority stake in Cainiao last year in an effort to expand its logistics network.
All these endeavors will help the company in building a more advanced delivery and logistics network to meet the growing demand in retail and e-commerce sector of China.

According to a report from Forrester, the online retail market in China is anticipated to reach $1 trillion in 2018 and is expected to reach $1.7 trillion by 2022, driven by growing mobile use.

Per the data from Statista, revenues in Chinese e-commerce market are expected to reach $917.7 million in 2022 by growing at a CAGR of 12% between 2018 and 2022.

Additionally, this is likely to boost the competitive position of Alibaba against its biggest rival in China, JD.com (NASDAQ:JD) , which is also spending heavily on logistics.

Zacks Rank & a Stock to Consider

Currently, Alibaba carries a Zacks Rank #3 (Hold).

A better-ranked stock that can be considered in the retail-wholesale sector is Amazon (NASDAQ:AMZN) , which flaunts a Zacks Rank #1 (Strong Buy). You can see Zacks Investment Research

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Written By: Zacks Investment Research

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