Why I'll Never Own Alibaba Stock

I once considered Alibaba (NYSE: BABA) an undervalued growth stock. It still trades at just 21 times forward earnings, and analysts expect its revenue and earnings to rise 50% and 37%, respectively, this year. And its market-leading positions in China's e-commerce and cloud markets also grant it the scale to easily crush its smaller rivals.

But after carefully reviewing Alibaba again, I believe I'll never buy this seemingly attractive Chinese tech stock, for three simple reasons.

Alibaba resembles an inverted version of Amazon (NASDAQ: AMZN). Whereas Amazon subsidizes the growth of its lower-margin retail segment with its higher-margin cloud business, Alibaba subsidizes the growth of its unprofitable businesses (including its cloud division) with its higher-margin "core commerce" revenue.

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Source Fool.com