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Published May 22, 2023

Prof G Markets: Alibaba and Mercado Libre, Share Buybacks vs. Dividends, and National Credit Ratings

Scott Galloway explores the strategic moves of e-commerce titans Alibaba and Mercado Libre amid regional risks, delves into the financial nuances of share buybacks versus dividends, and addresses the economic implications of aging populations on national credit ratings, emphasizing the need for strategic demographic solutions.
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Episode Highlights

  • Alibaba's Strategy

    examines Alibaba's recent financial performance, highlighting its decision to spin off its cloud division into a separate publicly traded company. This move mirrors a strategy he has long advocated for Amazon's AWS, suggesting it could unlock significant value for Alibaba. Despite missing revenue and EPS expectations, the spin-off is seen as a strategic pivot that could potentially enhance Alibaba's market position 1.

    Alibaba missed expectations on revenue and EPS, but it announced it will spin off its cloud division as a separate publicly traded company.

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    Galloway notes that while Alibaba faces challenges, this strategic decision could be a game-changer in the competitive e-commerce landscape.

       

    Mercado Libre's Growth

    praises Mercado Libre's impressive growth, likening it to a younger Amazon. The company reported a striking 58% growth in Q1 2023, with operating margins significantly higher than Amazon's, thanks to the integration of its ad network 2. This growth trajectory positions Mercado Libre as a formidable player in Latin America's e-commerce market.

    Mercado Libre is probably the most impressive company probably in Latin America. It's really well run.

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    Galloway suggests that despite its youth compared to Amazon, Mercado Libre's robust performance makes it a noteworthy competitor.

       

    Government Risks

    Government risks are a significant concern for investors in companies like Alibaba and Mercado Libre. points out that the Chinese government's heavy-handed approach can pose threats to businesses, as seen with Alibaba's past challenges 3. Similarly, Mercado Libre faces risks from Argentina's political instability and history of government corruption.

    Absolutely government risks.

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    Despite these risks, Galloway believes that the potential for growth in these markets remains strong, provided investors are mindful of the political landscapes.

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