Aswath Damodaran: This Might Explain Why Munger Bought Alibaba – ValueWalk Premium
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Aswath Damodaran: This Might Explain Why Munger Bought Alibaba

In his latest article titled – China’s Tech Crackdown: Its about Control, not Consumers or Competition!, Aswath Damodaran values four of China’s tech giants, taking into account the latest government actions. Here’s an excerpt from the presentation:

Q2 2021 hedge fund letters, conferences and more

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Based upon my assessments, the quick takeaway is that at current stock prices, all four of the companies are under valued, with what I believe are reasonable constraints brought in by government actions. Alibaba is the most undervalued (by 12.7%), followed by Tencent (by 8%), but Didi and JD.com are close to being fairly valued (undervalued by 3.65% and 2.07%).

Digging deeper, there is substantial downside if the government becomes openly and actively adversarial, with Didi dropping to becoming almost worthless, if that happens. On the upside, if any of these companies finds a way into the government’s good graces, the benefits that flow from it can increase the upside at each of these companies, but most at Didi.

Didi is clearly more exposed to government actions than the other three, suggesting a broader principle at play, which is that young companies are more affected in terms of both upside and downside, by government actions and regulations, than older companies.

You can watch the entire presentation here:

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Article by The Acquirer's Multiple


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