Alibaba vs Microsoft Which Is a Better Investment?

Alibaba and Microsoft are two of the biggest technology companies in the world, but they operate in very different markets. Alibaba is a Chinese e-commerce giant that dominates the online retail industry in China, while Microsoft is a global leader in software and cloud computing services. Investors often compare the two companies' stocks, weighing factors such as revenue growth, profitability, and market potential. Both Alibaba and Microsoft have experienced significant growth in recent years, but their stocks have reacted differently to market conditions and economic trends.

Alibaba or Microsoft?

When comparing Alibaba and Microsoft, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Alibaba and Microsoft.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Alibaba has a dividend yield of 3.01%, while Microsoft has a dividend yield of 0.69%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Alibaba reports a 5-year dividend growth of 0.00% year and a payout ratio of 54.40%. On the other hand, Microsoft reports a 5-year dividend growth of 10.16% year and a payout ratio of 24.63%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Alibaba P/E ratio at 18.25 and Microsoft's P/E ratio at 36.73. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Alibaba P/B ratio is 1.65 while Microsoft's P/B ratio is 11.55.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Alibaba has seen a 5-year revenue growth of 2.38%, while Microsoft's is 0.99%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Alibaba's ROE at 8.88% and Microsoft's ROE at 34.56%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $87.24 for Alibaba and $445.58 for Microsoft. Over the past year, Alibaba's prices ranged from $66.63 to $117.82, with a yearly change of 76.83%. Microsoft's prices fluctuated between $366.28 and $468.35, with a yearly change of 27.87%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.