Key Takeaways
- The famed investor liquidated his complete Alibaba holdings, reallocating capital into an expanded JD.com position
- According to Burry, Alibaba shares would require a 50% decline before he’d reconsider the investment
- The e-commerce giant plans to raise HK$80 billion for AI expansion, diluting existing ownership by 3.7%
- JD.com’s valuation stands at 8.3x prospective earnings with 10.7% free cash flow yield compared to Alibaba’s negative 4.2% yield
- Wall Street firm Morgan Stanley recently cut JD.com to Underweight, setting a $28 target price
The legendary investor behind the 2008 subprime mortgage short, Michael Burry, has completely exited his Alibaba holdings, redirecting those funds into JD.com shares.
Taking to X (formerly Twitter), Burry disclosed that he executed this portfolio swap several months back, rotating from Alibaba into a substantial JD.com stake. He made it clear there’s no turning back.
The catalyst behind his decision is straightforward. Alibaba unveiled plans for an HK$80 billion capital raise—approximately $10.2 billion—earmarked for artificial intelligence infrastructure investments. For Burry, this signals that equity dilution has become standard operating procedure at Alibaba.
“Issuing shares is now its new paradigm,” Burry stated. He emphasized that Alibaba’s stock price would need to plummet roughly 50% from present levels before he’d entertain buying back in.
Breaking Down the Valuation Metrics
The financial comparison strongly favors Burry’s switch. Alibaba currently commands a 25x trailing price-to-earnings ratio alongside a concerning negative 4.2% free cash flow yield. In contrast, JD.com sits at 17.9x trailing earnings and just 8.3x forward earnings, while delivering a robust 10.7% free cash flow yield.
The dividend story also tilts toward JD.com, offering a 3.3% yield versus Alibaba’s meager 0.9%. Wall Street analysts project approximately 49.6% potential upside to intrinsic value for JD.com shares, while Alibaba shows only 19.9% upside potential.
Alibaba’s stock placement involves issuing 710 million fresh shares priced at HK$112.70 apiece—representing an 8.4% markdown from the previous closing price. This transaction inflates the total share count by approximately 3.7%. Following the announcement, Alibaba stock plummeted nearly 10%.
From a profitability perspective, Alibaba’s net earnings contracted from $17.83 billion down to $15.35 billion despite achieving 8% revenue growth. The company’s return on invested capital has deteriorated to a mere 2.6%.
JD.com similarly experienced declining net income, sliding from $5.67 billion to $2.81 billion. However, market analysts attribute this decrease to strategic investments in emerging business lines such as food delivery services rather than fundamental operational weakness.
Potential Downsides Worth Considering
Burry’s strategic shift doesn’t enjoy universal support. Morgan Stanley recently slashed its JD.com rating to Underweight, establishing a $28 price objective that falls beneath current trading levels.
Barclays analysts have raised concerns that JD.com maintains substantial exposure to electronics and home appliance segments, product categories potentially vulnerable as Chinese government trade-in incentive programs expire.
Regarding Alibaba, Wall Street sentiment leans surprisingly bullish. The consensus price forecast suggests approximately 58.5% appreciation potential, while certain fundamental valuation models place fair value around $143.11—roughly 20% above today’s prices.
Burry’s repositioning exemplifies textbook value investing strategy. He’s divesting from a capital-intensive company trading at premium multiples while acquiring a cash-generative business available at discounted valuations.
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