Alibaba (NYSE:BABA) crushed analyst expectations for its second quarter last week but the company has barely had time to celebrate as it preps for its biggest sales day of the year on November 11: Singles Day.
What is Singles Day?
The sales holiday takes place on November 11 each year, supposedly because of the loneliness of the number "11" with its two "ones." Started in the 1990s to help single people celebrate a sort of anti-Valentines holiday, Alibaba took advantage of the sentiment in 2009 by encouraging people to buy gifts for themselves since they don't have a significant other.
For a made-up holiday, Singles Day does pretty well. Last year, Alibaba recorded $17.8 billion in sales during its 24-hour Singles Day event, up from $14.3 billion in 2015. This year, customers are expected to spend $23 billion on Alibaba's platform this Saturday, according to global consulting firm Oliver Wyman.
An expert in the field, Mitchell Green, managing partner of Lead Edge Capital said: "Alibaba created a holiday and it actually worked. It's remarkable."
It's worth noting that Alibaba announced in May 2016 that the Securities and Exchange Commission (SEC) was investigating the operating data from last years Singles Day. However, most analysts agree that this isn't a big deal considering it's very easy for a short seller to call the SEC to get an investigation started. An investigation doesn't necessarily mean a company has done anything wrong. "It's a non-issue," said Green.
Singles Day day is important for Alibaba and its investors because it has become a measure of how well Alibaba is doing. Of course, if you watched earnings last week, you already have a good feeling about Alibaba. In addition to reporting 61% revenue growth over the same period last year, the company hiked its full-year revenue growth forecast to between 49% and 53%, up from 45% to 49%.
Alibaba Singles Day vs. Amazon Prime Day
If you're living in the U.S. you may be more familiar with Amazon (NASDAQ: AMZN) Prime Day vs. Singles Day in China.
Amazon started its own massive sales day in 2015 to celebrate its 20th birthday as a company. After looking at the impressive sales figures from that first Prime Day, Amazon decided to make it a tradition. It's possible that Amazon was looking to copy Alibaba in using an artificial holiday to bring in massive sales.
"Amazon was 100% copying Alibaba's strategy," said Green.
Amazon and Alibaba are often compared and lumped together because they are by far the most powerful online retailers in their respective countries. However, Alibaba looms over Amazon in sales, not only because it mainly caters to China's huge population of 1.4 billion -- versus the much smaller U.S. population of 323 million -- but also because it's simply a bigger company.
"Alibaba is like a combination of Amazon, Walmart, Home Depot, Lowes, Kroger, Gap, Visa, and Netflix" said Green.
Just how much bigger is Alibaba? To give you an idea, while Amazon didn't release specific sales figures for its latest Amazon Prime Day, analysts estimate the company sold about $1 billion worth of goods. While that's a 60% increase over 2016 Prime Day sales, its pitiful compared to the $17.8 billion in sales Alibaba did last Singles Day.
Alibaba is worth your time
If you've been ignoring Alibaba because you didn't understand it as well as you understand Amazon, you've been missing out.
Alibaba's stock has climbed a staggering 112% in 2017. With Singles Day this weekend and a forecast for full-year revenue growth between 49% and 53%, this stock has plenty of room to run.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Netflix, and Visa. The Motley Fool has the following options: short January 2018 $170 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.