TLDR
- Michael Burry sold his entire Alibaba stake and moved into a larger JD.com position
- Burry says Alibaba would need to fall 50% before he would buy it again
- Alibaba is raising HK$80 billion to fund AI infrastructure, diluting shareholders by 3.7%
- JD.com trades at 8.3x forward earnings with a 10.7% free cash flow yield versus Alibaba’s negative 4.2%
- Morgan Stanley has downgraded JD.com to Underweight with a $28 price target
Michael Burry, the investor famous for betting against the U.S. housing market before the 2008 financial crisis, has dumped his Alibaba shares and put that money into JD.com.
Burry confirmed the move on X, writing that he flipped his Alibaba stock into a large JD.com position a few months ago. He says he has no plans to go back.
His reason is direct. Alibaba announced a share sale worth HK$80 billion, roughly $10.2 billion, to fund AI infrastructure. Burry sees this as a sign that share issuance is now part of how Alibaba operates.
“Issuing shares is now its new paradigm,” Burry wrote. He added that Alibaba would need to drop around 50% from current levels before he would consider buying it again.
The Valuation Gap Between the Two Stocks
The numbers behind the trade are clear. Alibaba trades at 25x trailing earnings with a negative free cash flow yield of 4.2%. JD.com trades at 17.9x trailing and 8.3x forward earnings, with a positive free cash flow yield of 10.7%.
JD.com also carries a 3.3% dividend yield compared to Alibaba’s 0.9%. Analysts see around 49.6% upside to fair value for JD.com, against 19.9% for Alibaba.
Alibaba’s share placement prices 710 million new shares at HK$112.70 each, an 8.4% discount to the prior close. That increases the share count by about 3.7%. Alibaba shares fell nearly 10% on the news.
On the earnings side, Alibaba’s net income fell from $17.83 billion to $15.35 billion even as revenue grew 8%. Its return on invested capital has dropped to just 2.6%.
JD.com also saw net income fall, from $5.67 billion to $2.81 billion. But analysts say that drop reflects spending on new ventures like food delivery rather than a core business problem.
Risks on Both Sides
Not everyone agrees with Burry’s move. Morgan Stanley downgraded JD.com to Underweight with a $28 price target, which sits below where the stock is currently trading.
Analysts at Barclays have flagged that JD.com relies heavily on electronics and home appliances, categories that could weaken as government trade-in subsidies wind down.
On the Alibaba side, the analyst consensus is actually positive. The average price target implies around 58.5% upside, and one fair value model puts Alibaba at $143.11, roughly 20% above current levels.
Burry’s trade reflects a classic value rotation. He is selling a cash-consuming stock at a higher multiple and buying a cash-generating one at a lower price.
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