Alibaba (BABA): Alibaba, like its American counterpart Amazon, controls multiple entities ranging from a financial services arm to a cloud computing business. Many of these spinoffs make successful companies in their own right. Alipay or Ant Financial, a spinoff of Alibaba, is the largest online payment service provider in the region preparing to IPO in 2017 with a valuation north of $60 billion.
Meanwhile, AliCloud, the cloud computing arm of Alibaba, continues to make waves in China’s rapidly growing cloud computing industry. As part of the company’s larger strategy, Alibaba plans on leveraging its cloud services to diversify into multiple verticals including AI, machine learning and image recognition. Some of these tools are being used to help tackle the rampant counterfeiting problem taking place on the platform. Alibaba Cloud has scaled significantly in the region but globally it still can’t compete with Amazon Web Services or Microsoft Azure.
The cloud service did score a huge victory at last week’s Davos event, agreeing to a 12 year partnership to provide the Olympics with cloud computing services. Gaining more publicity on the global stage will help narrow the gap between them and either of the cloud computing heavy weights.
As with most companies, a few near term headwinds could hamper this week’s financial report. Trump still remains committed to doing something about China, which could very well limit Alibaba’s U.S. expansion. Beyond geopolitical risks, increasing competition, currency headwinds and an overall weak consumer environment pose a threat to performance.
Johnson & Johnson (JNJ): Trump’s to do list for his first 100 days in office includes repealing key legislation such as Dodd Frank and Obamacare but also tackling the powerful drug manufacturing industry. Investors initially believed that Trump would sweep drug pricing issues under the rug, as many Republicans have, but it now appears Trump wants to police the pharmaceutical industry. For a company like Johnson & Johnson that could mean some pushback on any incremental increases it plans to pursue in the future, thereby putting pressure on top and bottom line growth. That said, J&J remains relatively insulated to Trump’s rhetoric compared to its peers, so any impact would largely be minimal. From a drug standpoint, new products like Imbruvica, Xarelto and Darzalex continue to outperform expectations while a robust pipeline bodes well for future results. Hepatitis C medication, Olysio, on the other hand, remains challenged largely due to increasing competition from Gilead Sciences, Merck, and great adoption of generic drugs.